Gratuity Act

Gratuity Act applies to employees engaged in Factories , Mines , Oil fields , Plantation ,Ports ,Railways Companies , Shops & Establishment .

Gratuity Act is applicable in any company in which 10 or more persons are employed or were employed on any day for preceeding 12 months .Appropriate Govt means central Govt where an establishment has branches in more than one state or an estblishment under the direct control of central Govt .

Continuous Service ::

A person is said to be in continuous service for the last 1 year if...

a) he works for 190 days in case he is employed in mine /underground and if such business works < 6 days a week .
b) 240 days in any other case .

For the last 6 months if ....
a) he works for 95 days in case he is employed in mine /underground and if such business works < 6 days a week .
b) 120 days in any other case .

Seasonal Business ::

An employee of a seasonal estabvlishment shall be deeemd to be in continuous service if he has actually worked for not less than 75 % of number of days on which establishment was operational during suich period .

Who is an employee under this Act ??

a) Every employee except any person who holds a post under the central govt /state govt and is governed by any other act is an employee .

b) Teacher is not an employee :: Teachers are not intended to be covered by the definition of employee .

c) All establishment except apprenticeships are entitled to Gratuity under this act .

Superannuation :: The age @ which an employee should vacate the employment (or as fixed in contract of emloyment is superannuation . In any other case age of 58 years is fixed .

Payment of Gratuity ::

Gratuity is only paid once an employee leaves an organisation . EVEN IF HE HAS COMPLETED 5 YEARS in the company though he is eligible for gratuity but he cannot receive the Gratuity during his association with the company . Only when he ceases to be an employee he can claim Gratuity . This could be on employees death or permanent disablement due to accident or some disease .

Procedure to claim Gratuity ::

Application should be send to the ER within 30 days from the date when gratuity becomes payable .If the date of superannuation or retirement maybe known ee may apply to ER before 30 days . A NOMINEE may also apply with a written application within 30 days .


Gratuity Amount ::

Step 1) Once the gratuity becomes payable ER shall determine the amount of gratuity and give notice in wirting to the controlling authority and the EE . This has to be done irrespective whether the application is received or no .

Step 2) The amount has to be paid to the EE within 30 days and if ER fails to do so then he has to pay interest to the EE @ LONG TERM DEPOSITS .The interest has to be paid from the date when gratuity becomes payable till the time when it is finally paid .

Step 3) NO interest has to be paid if there is a delay due to tHE problem of an employee and when ER has received a written application from the controlling authority for the delay in the payment .

Calculation of Gratuity Amount :;

Gratuity = 15 days last drawan basic salary for each completed years of service .

Definition of wages while calculating Gratuity ::

1) Wages include all emoluments earned by employee in cash while on duty or on leave .
2) It includes DA .
3) It doesn't include any bonus , commision , HRA ,OT wages or any other allowance .
4) If food supplied by ER is added in cash form to EE salary it will not be included .

Will a manager or an employee working in managerial capacity be covered in Gratuity Act ??

Yes . Anybody even employed in maangerial or administrative capacity will be covered under the Gratuity Act .But any employee who is working with central govt or state govt and is governed by any other act or rules will not be covered under the Gratuity Act .