Know About Gratuity

Posted In Career, India - By NitiN Kumar Jain On Monday, August 24th, 2009 With 0 Comments

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If you are also looking for following information:

  • What is Gratuity?
  • When is it payable?
  • Who all are the beneficiaries?
  • Gratuity amount payable?

Then read on:

Gratuity Act 1972, Republic of India.

What is Gratuity?

‘Gratuity’ is a retrial benefit. This act envisages in providing a retirement benefit to the workman who have rendered long and unblemished service to the employer. Gratuity is a reward for long and meritorious service.

Applicability of the Act:

Every factory, mine, oil field, plantation, port, railways, company, shop, establishment or educational institutions employing ten or more employees.

When is Gratuity Payable?

Gratuity shall be payable to an “employee” on the termination of his employment after he has rendered continuous service for not less than five years.

  • On his superannuation.
  • On his retirement or resignation.
  • On his death or disablement due to accident or disease.

Note: However, the condition of five years of continuous service is not necessary if service is terminated due to death or disablement.

To whom is Gratuity Payable?

Gratuity is normally payable to the employee himself, however in the case of death of the employee it shall be paid to his nominee & nomination has been made to his heirs. Incase the nominee is a minor; share of the minor shall be deposited with the controlling authority who shall invest the same for benefit of the minor, until he/she attains majority.

Amount of Gratuity Payable – Method of Calculations?

In case of non –seasonal establishment:

Gratuity Payable = 15 days wages x No of completed years of service,

In case of seasonal establishment:

Gratuity Payable= 7 days wages x No of seasons for which employed.

Maximum Limit of Gratuity:

The government through an ordinance has enhanced the maximum limit of the amount of gratuity payable under the Act is Rs 100,000 to Rs 2,50,000 with effect from 02-04-97.Now at present the maximum limit is 3.5 lacks.

Forfeiture of Gratuity

The gratuity of an employee whose service have been terminated for any Act of willful omission or negligence causing any damage or loss to or destruction of property belonging to the employer, gratuity shall be forfeited to the extent of the damage or loss caused. The right of forfeiture is limited to the extent of damage.

The gratuity payable to an employee shall be wholly forfeited:

  1. If the services of such employee have been terminated for his riotous or disorderly conduct or any other act of violence on his part, or
  2. If the service of such employee have been terminated for any act which constitutes an offense involving moral turpitude, provided that such offense is committed by him in the course of his employment.

Read Gratuity Act 1972

Gratuity Calculators

Of these I found NDTV calci straight forward.

Hope the information is useful.