Payment of Gratuity

The Payment of Gratuity Act is an Indian legislation that provides for the payment of gratuity to employees in certain establishments, factories, mines, oilfields, plantations, ports, railway companies, and other establishments. It is designed to provide financial security to employees after their retirement, resignation, or death.

Here are some key features of the Payment of Gratuity Act:

  • Applicability: The Act applies to establishments with 10 or more employees, either directly or through contractors, on any day in the preceding 12 months.
  • Eligibility: An employee becomes eligible for gratuity after completing five years of continuous service with an employer. However, the requirement of five years is not applicable in the case of death or disability of the employee.
  • Calculation of Gratuity: The gratuity amount is calculated based on a formula specified in the Act. It is equal to 15 days of wages for each completed year of service or part thereof in excess of six months, subject to a maximum limit of 20 lakhs rupees (as of September 2021).
  • Payment: The employer is responsible for paying the gratuity amount to eligible employees within 30 days from the date it becomes payable. If the gratuity is not paid within the specified period, the employer may have to pay interest on the amount.
  • Nomination: An employee can nominate one or more family members to receive the gratuity in case of their death. The nomination should be made in writing and submitted to the employer.
  • Penalty: Non-compliance with the provisions of the Act can result in penalties,including imprisonment and/or fines.

It’s important to note that specific provisions of the Payment of Gratuity Act may vary, and it is advisable to refer to the latest version of the Act or consult a legal expert for accurate and up-to-date information.