Payment of Gratuity
2.1 Payment of
Gratuity (Sec. 4)
i. Payment of
gratuity is mandatory. Gratuity is paid to an employee on termination of his
employment after he has rendered continuous service for not less than five
years.
ii. Gratuity is
payable to an employee –
-
on his Superannuation [Darshan Engg. Works v. Controlling
Authority]
-
on his retirement or resignation [Texmaco Ltd. v. Shri Ram Dhan]
-
on his death or disablement due to accident or diseases.
iii. In case of
death or disablement, the condition of the completion of five years continuous
service is not essential. Usually the gratuity is payable to the employee but
in case of the death of the employee, gratuity payable to him shall be paid to
his nominee or the heirs as the case may be. [Administrator, Shree Jagannath Temple Punjab v. Labour Court
2.1.1
Calculation of Gratuity Payable
i. For calculation
of gratuity payable to an employee the establishments can be broadly
categorized into the following [Sec. 4(2)]
a. Ordinary Establishments (other than seasonal establishments):
The gratuity is computed at the rate of 15 days wages based (at the rate of
wages last drawn) for every completed year of service or part thereof in excess
of 6 months. [Delhi Cloth & General Mills Co. Ltd. v. Workmen]
b. Seasonal establishments: To employees not employed
throughout the year, Gratuity at the rate of seven days wages for each season would
be paid.
ii. In the case of a monthly rated
employee, the fifteen days' wages shall be calculated by dividing the monthly
rate of wages last drawn by him by twenty-six and multiplying the quotient by
fifteen. [Akbar Hussein v.Payment of Gratuity
Authority, Ahmedabad], [Hindustan
Lever Ltd. v. Kasargod Devidas Rao.],
[Bharat Commerce & Industries v. Ramprasad]
iii. The employees working
throughout the year are entitled to get gratuity at the rate of 15 days wages
for every completed year of service or part thereof in excess of 6 months.
iv. The amount of gratuity
payable to an employee shall not exceed 3, 50,000 rupees. [S. 4(3)]
v. Nothing in this section
shall affect the right of an employee to receive better terms of gratuity under
any award or agreement or contract with the employer. [Sec.
4 (5)]
2.1.2
Forfeiture of Gratuity (Sec. 4 (6))
In some cases
gratuity may be wholly
or partially forfeited where an employee has been
terminated from his service due to any negligence, violence or for any omission
conducted purposefully causing any damage or loss to, or destruction of,
property belonging to the employer, and in such case
the amount of gratuity shall be forfeited to the extent of the damage or
loss so caused. [Bharat Gold Mines Ltd. v. The
Regional Labour Commr., Supra], [Jaswant Singh Gill v. Bharat
Coking Coal Ltd], [Wazir Chand v.
Union of India], [K.c. Mathew v. Plantation Corporation of Kerala Ltd.], [Travancore Plywood Industries Ltd. v. Regional Joint Labour Commissioner], [Permali Wallance Ltd. v. State
of M.P.], [S.N. Sunderson
(Minerals) Ltd. v. Appellate
Authority-cum-Deputy Labour Commissioner], [Bharat Gold Mines Ltd. v. Regional Labour Commissioner (Centra!)]
2.1.3 Power to Exempt (Sec.
5)
If the appropriate
Government finds that gratuity or pensionary benefits is more favourable than
the benefits conferred under this Act, then the appropriate government may
exempt any establishments, any employee or class of employees (which this Act applies) from the provision
of this Act. However, no such notification shall be issued so as to prejudicially
affect the interests of any person.
Such exemption may be
notified with retrospective effect (but not before the date of commencement of
the Act) without any prejudice at all.
2.2 Payment of
Gratuity (Sec. 7)
|
Situation
|
Payment
Rule
|
|
1.
Normal case
|
Payable
to employee
|
|
2.
In case of death
|
|
|
(i) Nomination has been
done
|
Payment
to Nominee (S)
|
|
(ii) Nomination has not been
done
|
Payment
to Legal heir(S)
|
|
(iii) nominee (s) or legal
heir(s) is minor
|
Share of such minor shall
be deposited with the controlling authority who shall invest the same in bank
or other financial institution for the benefit of such minor until he / she
attains majority.
|
2.2.1 Application
i.
For payment of gratuity, the employee or his
authorized person must submit an application within a prescribed time and
manner. [Sec. 7(1)]
ii.
In case of death of the employee, a nominee of the employee shall apply
to the Employer within 30 days in Form ‘J’.
iii.
Where the date of superannuation is known, the employee himself may
apply to the employer before 30 days from the date of his superannuation or
retirement. [Sec. 7(1)] and Rule 7(1)]
2.2.2 Determination of gratuity amount
When gratuity becomes payable,
(whether an application has been made or not), the employer must determine the
amount of gratuity and give notice in writing to the person to whom the
gratuity is payable and also to the controlling authority specifying the amount
of gratuity so determined. [Sec. 7(2)]
2.2.3 Time of Payment
The employer shall pay the amount of gratuity to the person to whom the
gratuity is payable within 30 days from the date it becomes payable. [Sec.
7(3)]
2.2.4 Payment of interest [Sec. 7(3A)]
In case of default in
payment of gratuity within the specified time, the employer shall be liable to
pay simple interest at a prescribed rate from the date it becomes payable upto
the date on which it is actually paid (unless the delay is due to the fault of
the employee and the employer has obtained permission in writing from the
controlling authority for the delayed payment on this ground). [Champaran
Sugar Co. Ltd. v. joint Labour Commissioner and Appellate
Authority], [Charan Singh v.
Birla Textiles], [Champaran Sugar Co. Ltd. v. Joint
Labour Commissioner-cum-Appellate Authority]
2.2.5 Persons eligible for sending application
i. The application for gratuity
may be sent to the employer by:
a. A nominee of an employee within
thirty days from the date of the gratuity became payable to him; [Rule 7(2)].
b. A legal heir of the
employee within one year from the date of gratuity became payable by the
employer [Rule 7(3)].
ii. The application for the
payment of gratuity field after the expiry of the specified time limit, shall
be entertained by the employer if the applicant shows sufficient cause for the
delay [Rule 7(5)].
2.3 Settlement of Dispute [Sec. 7(4)]
In case of any dispute regarding amount, admissibility or eligibility, the employer shall deposit
with the controlling authority such amount as he admits to be payable by him as
gratuity. In case of other disputes, employer, employee or any other person may
make an application to the controlling authority for deciding the dispute.
2.3.1 Controlling Authority (Sec.3)
The appropriate government
may, by notification, appoint any officer to be a controlling authority who shall
be responsible for the administration of the Act. Different controlling
authorities may be appointed for different areas.
2.3.2 Power
of Controlling Authority
The controlling authority
has the following powers under the Act-
2.3.2.1 Power to Decide the Dispute
In case of dispute regarding
amount of gratuity payable to an employee, admissibility of any claim for
payment for gratuity entitlement to
receive the gratuity, the controlling authority, on application from the person
raising the dispute, shall decide the dispute. [Sec. 7(4)]
2.3.2.2 Power to Conduct an
Enquiry
i. In deciding the dispute, the
controlling authority can conduct an enquiry by an opportunity to the parties of
being heard. The controlling authority shall have the same powers as are vested
in a court, while trying a suit under the Code of Civil Procedure, 1908.
ii. To conduct an enquiry relating to gratuity, the Controlling authority may:
a. enforce attendance of any
person or examining him on oath;
b. require production of
documents;
c. receive evidence on
affidavits;
d. issue commissions for
examination of witnesses.
2.3.2.3 Power to direct Employer
The controlling authority
shall, after due inquiry and after giving the parties to the dispute a
reasonable opportunity of being heard shall direct the employer to pay such
amount (if any amount is found to be payable).
The controlling authority may then direct the employer to pay the amount
(or the amount reduced by the amount deposited by him) to the employee (or his
nominee). [Sec.7(4)(d)]
2.3.2.4 Recovery of
gratuity (Sec. 8)
If the amount of gratuity
is not paid by the employer within the prescribed time:
The controlling authority shall issue a certificate (after giving the
employer a reasonable opportunity) for that amount to the Collector.
The collector shall recover the same, together with compound interest
(at rate prescribed by the Central Government) from the date of expiry of the
prescribed time. [Nagar Palika v. Controlling Authority]
The amount of interest payable cannot exceed the amount of gratuity
payable.
2.3.3
Appeal
An employer, aggrieved by
an order of the controlling authority, may appeal to the appropriate government
within 60 days from receipt of order, on proof of deposit of equal to that of
gratuity money with the controlling authority or the deposit of the said amount
with Appellate Authority.
The appropriate government shall allow the employer or the parties to
the appeal as the case may be, a reasonable opportunity of being heard.
No appeal by an employer shall be admitted if he does not produce a
certificate from thecontrolling authority, while appealing, to the effect that
he has deposited the amount equal to the amount of gratuity to be payable to an
employee with the controlling authority as required to be deposited or deposit
such amount with the appellant authority. [Sec.7(7)] [Nataraja Pillai v. Regional
ft. Labour Commissioner], [Malbar
Spg. & Wvg. Mills v. N.N. Nair]
The appropriated Government or the appeal authority, as the case may be
may after giving the parties to the appeal an opportunity of being heard,
confirm, modify or reserve the decision of the controlling authority.
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