The Payment of Gratuity Act, 1972

(1) This Act may be called the Payment ofGratuity Act, 1972. (2) It extends to the whole of India: Provided that in so far as it relates to plantations or ports, it shall not extend to the State of Jammuand Kashmir*. (3) It shall apply to-- (a) every factory, mine, oilfield, plantation, port and railway company; (b) every shop or establishment within the meaning of any law for the time being in force inrelation to shops and establishments in a State, in which ten or more persons are employed, or wereemployed, on any day of the preceding twelve months; (c) such other establishments or class of establishments, in which ten or more employees areemployed, or were employed, on any day of the preceding twelve months, as the Central Governmentmay, by notification, specify in this behalf. 1[(3A) A shop or establishment to which this Act has become applicable shall continue to be governedby this Act notwithstanding that the number of persons employed therein at any time after it has becomeso applicable falls below ten.] (4) It shall come into force on such date2as the Central Government may, by notification, appoint

In this Act, unless the context otherwise requires,-- (a) "appropriate Government" means,-- (i) in relation to an establishment-- (a) belonging to, or under the control of, the Central Government, (b) having branches in more than one State, (c) of a factory belonging to, or under the control of, the Central Government, (d) of a major port, mine, oilfield or railway company, the Central Government, (ii) in any other case, the State Government; (b) "completed year of service" means continuous service for one year; 1[(c) "continuous service" means continuous service as defined in section 2A;] (d) "controlling authority" means an authority appointed by the appropriate Government undersection 3; 2[(e) "employee" means any person (other than an apprentice) who is employed for wages,whether the terms of such employment are express or implied, in any kind of work, manual orotherwise, in or in connection with the work of a factory, mine, oilfield, plantation, port, railwaycompany, shop or other establishment to which this Act applies, but does not include any such personwho holds a post under the Central Government or a State Government and is governed by any otherAct or by any rules providing for payment of gratuity;] (f) "employer" means, in relation to any establishment, factory, mine, oilfield, plantation, port,railway company or shop-- (i) belonging to, or under the control of, the Central Government or a State Government, aperson or authority appointed by the appropriate Government for the supervision and control ofemployees, or where no person or authority has been so appointed, the head of the Ministry or theDepartment concerned, (ii) belonging to, or under the control of, any local authority, the person appointed by suchauthority for the supervision and control of employees or where no person has been so appointed,the chief executive officer of the local authority, (iii) in any other case, the person, who, or the authority which, has the ultimate control overthe affairs of the establishment, factory, mine, oilfield, plantation, port, railway company or shop,and where the said affairs are entrusted to any other person, whether called a manager, managingdirector or by any other name, such person; (g) "factory" has the meaning assigned to it in clause (m) of section 2 of the Factories Act, 1948(63 of 1948); (h) "family", in relation to an employee, shall be deemed to consist of (i) in the case of a male employee, himself, his wife, his children, whether married orunmarried, his dependent parents 3and the dependent parents of his wife and the widow andchildren of his predeceased son, if any, (ii) in the case of a female employee, herself, her husband, her children, whether married orunmarried, her dependent parents and the dependent parents of her husband and the widow andchildren of her predeceased son, if any: 4* * * * * * Explanation.--Where the personal law of an employee permits the adoption by him of achild, any child lawfully adopted by him shall be deemed to be included in his family, and wherea child of an employee has been adopted by another person and such adoption is, under thepersonal law of the person making such adoption, lawful, such child shall be deemed to beexcluded from the family of the employee; (i) "major port" has the meaning assigned to it in clause (8) of section 3 of the Indian Ports Act,1908 (15 of 1908); (j) "mine" has the meaning assigned to it in clause (j) of sub-section (1) of section 2 of the MinesAct, 1952 (35 of 1952); 5[(k) "notification" means a notification published in the Official Gazette and the expression"notified" shall be construed accordingly;] (l) "oilfield" has the meaning assigned to it in clause (e) of section 3 of the Oilfields (Regulationand Development) Act, 1948 (53 of 1948); (m) "plantation" has the meaning assigned to it in clause (f) of section 2 of the PlantationsLabourAct, 1951 (69 of 1951); (n) "port" has the meaning assigned to it in clause (4) of section 3 of the Indian Ports Act, 1908(15 of 1908); (o) "prescribed" means prescribed by rules made under this Act; (p) "railway company" has the meaning assigned to it in clause (5) of section 3 of the IndianRailways Act, 1890 (9 of 1890); (q) "retirement" means termination of the service of an employee otherwise than onsuperannuation; 6[(r) "superannuation", in relation to an employee, means the attainment by the employee of suchage as is fixed in the contract or conditions of service as the age on the attainment of which theemployee shall vacate the employment;] (s) "wages" means all emoluments which are earned by an employee while on duty or on leave inaccordance with the terms and conditions of his employment and which are paid or are payable to himin cash and includes dearness allowance but does not include any bonus, commission, house rentallowance, overtime wages and any other allowance.

1[2A. Continuous service.--For the purposes of this Act,-- (1) an employee shall be said to be in continuous service for a period if he has, for that period,been in uninterrupted service, including service which may be interrupted on account of sickness,accident, leave, absence from duty without leave (not being absence in respect of which an order 2***treating the absence as break in service has been passed in accordance with the standing orders, rulesor regulations governing the employees of the establishment), lay-off, strike or a lock-out or cessationof work not due to any fault of the employee, whether such uninterrupted or interrupted service wasrendered before or after the commencement of this Act; (2) where an employee (not being an employee employed in a seasonal establishment) is not incontinuous service within the meaning of clause (1), for any period of one year or six months, he shallbe deemed to be in continuous service under the employer-- (a) for the said period of one year, if the employee during the period of twelve calendarmonths preceding the date with reference to which calculation is to be made, has actually workedunder the employer for not less than (i) one hundred and ninety days, in the case of an employee employed below the groundin a mine or in an establishment which works for less than six days in a week; and (ii) two hundred and forty days, in any other case; (b) for the said period of six months, if the employee during the period of six calendarmonths preceding the date with reference to which the calculation is to be made, has actuallyworked under the employer for not less than (i) ninety-five days, in the case of an employee employed below the ground in a mine orin an establishment which works for less than six days in a week; and (ii) one hundred and twenty days, in any other case. 3[Explanation.-- For the purposes of clause (2), the number of days on which an employeehas actually worked under an employer shall include the days on which-- (i) he has been laid-off under an agreement or as permitted by standing orders madeunder the Industrial Employment (Standing Orders) Act, 1946 (20 of 1946), or under theIndustrial Disputes Act, 1947 (14 of 1947), or under any other law applicable to theestablishment; (ii) he has been on leave with full wages, earned in the previous year; (iii) he has been absent due to temporary disablement caused by accident arising out ofand in the course of his employment; and (iv) in the case of a female, she has been on maternity leave; so, however, that the totalperiod of such maternity leave does not exceed 4[such period as may be notified by theCentral Government from time to time];] (3) where an employee, employed in a seasonal establishment, is not in continuous service withinthe meaning of clause (1), for any period of one year or six months, he shall be deemed to be incontinuous service under the employer for such period if he has actually worked for not less thanseventy-five per cent. of the number of days on which the establishment was in operation during suchperiod.]

The appropriate Government may, by notification, appoint any officer tobe a controlling authority, who shall be responsible for the administration of this Act and differentcontrolling authorities may be appointed for different areas.

(1) Gratuity shall be payable to an employee on the termination of hisemployment after he has rendered continuous service for not less than five years,-- (a) on his superannuation, or (b) on his retirement or resignation, or (c) on his death or disablement due to accident or disease: Provided that the completion of continuous service of five years shall not be necessary where thetermination of the employment of any employee is due to death or disablement: 1[Provided further that in the case of death of the employee, gratuity payable to him shall be paid tohis nominee or, if no nomination has been made, to his heirs, and where any such nominees or heirs is aminor, the share of such minor, shall be deposited with the controlling authority who shall invest the samefor the benefit of such minor in such bank or other financial institution, as may be prescribed, until suchminor attains majority.] Explanation.-- For the purposes of this section, disablement means such disablement as incapacitatesan employee for the work which he was capable of performing before the accident or disease resulting insuch disablement. (2) For every completed year of service or part thereof in excess of six months, the employer shallpay gratuity to an employee at the rate of fifteen days' wages based on the rate of wages last drawn by theemployee concerned: Provided that in the case of a piece-rated employee, daily wages shall be computed on the average ofthe total wages received by him for a period of three months immediately preceding the termination of hisemployment, and, for this purpose, the wages paid for any overtime work shall not be taken into account: Provided further that in the case of 2[an employee who is employed in a seasonal establishment andwho is not so employed throughout the year], the employer shall pay the gratuity at the rate of seven days'wages for each season. 3[Explanation.-- In the case of a monthly rated employee, the fifteen days' wages shall be calculatedby dividing the monthly rate of wages last drawn by him by twenty-six and multiplying the quotient byfifteen. (3) The amount of gratuity payable to an employee shall not exceed 4[5[such amount as may benotified by the Central Government from time to time] .] (4) For the purpose of computing the gratuity payable to an employee who is employed, after hisdisablement, on reduced wages, his wages for the period preceding his disablement shall be taken to bethe wages received by him during that period, and his wages for the period subsequent to his disablementshall be taken to be the wages as so reduced. (5) Nothing in this section shall affect the right of an employee receive better terms of gratuity underany award or agreement or contract with the employer.(6) Notwithstanding anything contained in sub-section (1),-- (a) the gratuity of an employee, whose services have been terminated for any act, wilful omissionor negligence causing any damage or loss to, or destruction of, property belonging to the employer,shall be forfeited to the extent of the damage or loss so caused; (b) the gratuity payable to an employee 6[may be wholly or partially forfeited]-- (i) if the services of such employee have been terminated for his riotous or disorderly conductor any other act violence on his part, or (ii) if the services of such employee have been terminated for any act which constitutes anoffence involving moral turpitude, provided that such offence is committed by him in the course ofhis employment. 7* * * * *