KNOWLEDGE BLOG ON "INDIAN LABOUR LAW AND HUMAN RESOURCE" - ADVOCATE GIRISH JAYRAM VIVALKAR: 04/27/15

Monday 27 April 2015

PAYMENT OF GRATUITY ACT, 1972

The Payment of Gratuity Act, 1972

APPLICABILITY

The Act applies to:

a. Every factory (as defined in Factories Act), mine, oil, field plantations, port & railway company.

b. Every shop or establishment in which TEN or more persons are/were employed.

c. Such other establishment in which ten or more employees employed or were employed on any day of the preceding 12 months.

ELIGIBILITY OF EMPLOYEES

The following persons are entitled to the benefits under the Act.

a. Any person [NOT Being an Apprentice] employed for wages in any kind of work (manual or otherwise) or in connection with work of factory, mine, plantation, oilfield, railway company, port or other establishment; and

b. At the time of retirement, resignation/termination, an employee should have rendered continuous service of not less than 5 years.

c. In case of death or disablement, the gratuity is payable, even if he has not completed 5 years of service.

d. Family in relation to male employee.

BENEFITS UNDER THE ACT

a. The quantum of gratuity is to be computed at the rate of 15 days’ wages (7 days wages in case of seasonal establishment) at the rate of wages last drawn by the employee concerned for every completed year of service or a part thereof exceeding 6 months.

b. "Wages" means all emoluments which are earned by an employee while on duty or on leave in accordance with the term and conditions of this employment and which are paid or are payable to him in case and includes, dearness allowance but does not include any bonus, commission, H.R.A., O.T. wages and any other allowance.

c. The total amount of gratuity payable shall not exceed Rs. 10,00,000/-

d. In case where employer offers the higher benefits of gratuity scheme, the employee will be eligible for such higher benefits.

e. In the case of monthly rated employees, per day wages shall be calculated by dividing monthly rate by 26 days.

OTHER IMPORTANT ISSUES

a. Employers other than Central Govt. or State Govt. obliged to obtain insurance from LIC in prescribed manner for liability for payment of gratuity.

b. Establishments to which Act applies must get registered with the Controlling Authority.

c. Once Act applies, it continues to apply even if employment strength falls below 10.

d. An employee who is eligible for payment of gratuity has to send a written application to the employer in Form I within 30 days from the date gratuity becomes payable.

PENALTIES FOR NON-COMPLIANCE

Non-payment of gratuity payable under the Act is punishable with imprisonment up to 2 years (minimum 6 months) and/or fine up to Rs. 20,000. Other contraventions/offences attract imprisonment up to 1 year and/or fine up to Rs. 10,000.

Hope this small write up will give insight about pertained subject.

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EMPLOYEE’S COMPENSATION ACT, 1923

The formerly known ‘Workmen’s Compensation Act, 1923,’ is now known as ‘Employee’s Compensation Act, 1923, and is an important enactment as it introduced a kind of social security scheme for the workers of this country. It enables an employee in the case of injury and his dependents in the case of his death, to claim the compensation at the cost of his employer organisation for such employment injury/ death.

APPLICABILITY

The Act applies to every employer:

i. Which includes any body of persons whether incorporated or not and any managing agent of an employer and the legal representative of a deceased employer; AND

ii. When the services of a employee are temporarily lent or let on hire to another person by the person with whom the employee has entered into a contract of service or apprenticeship, means such other person while the employee is working for him.

ELIGIBILITY OF EMPLOYEES

Every employee to whom a personal injury is caused by accident arising out of and in the course of employment, his employer shall be liable to pay compensation in accordance with the provisions of Chapter II to the act.

BENEFITS UNDER THE ACT

Amount of compensation shall be payable by the employer:

a. Where death results from injury 50% of monthly wages X relevant factor or Rs. 1,20,000 whichever is more. (relevant factor depends upon the age of employee)

b. Where permanent total disablement results from the injury 60% of monthly wages X relevant factor or Rs. 1,40,000, whichever is more (relevant factor depends upon the age of an employee).

c. Where permanent partial disablement or temporary disablement results from injury as per prescribed schedule.

d. Where temporary disablement, total or partial, results from injury, a half monthly payment equivalent to 25% of monthly wage of workman.

e. The funeral expenses have been increased to Rs. 5,000/-.

OTHER IMPORTANT ISSUES

a. Any contract by an employee waiving his right to be compensated under this Act is null and void.

b. The intention of the Legislature and the circumstances under which law was enacted is to be seen. It is interpreted in favour of the weak.

c. Notice book is to be maintained. A statement, report return is to be filed when applicable.