Discuss the provisions relating to the payment of gratuity under the Payment of Gratuity Act, 1972.
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Question: Discuss the provisions relating to the payment of gratuity under the Payment of Gratuity Act, 1972. Find the question and answer of Labour Law only on Legal Bites. [Discuss the provisions relating to the payment of gratuity under the Payment of Gratuity Act, 1972.]AnswerThe Payment of Gratuity Act, 1972 is a social security legislation that provides for the payment of gratuity to employees who have completed a minimum of five years of continuous service with an employer. Gratuity is...
Question: Discuss the provisions relating to the payment of gratuity under the Payment of Gratuity Act, 1972.
Find the question and answer of Labour Law only on Legal Bites. [Discuss the provisions relating to the payment of gratuity under the Payment of Gratuity Act, 1972.]
Answer
The Payment of Gratuity Act, 1972 is a social security legislation that provides for the payment of gratuity to employees who have completed a minimum of five years of continuous service with an employer. Gratuity is a lump sum payment made by an employer to an employee as a token of appreciation for the employee's long and meritorious service.
The Provisions of the Payment of Gratuity Act, 1972 are as follows:
Eligibility: An employee is eligible for gratuity if he has completed five years of continuous service with an employer. However, in the case of death or disablement, the employee becomes eligible for gratuity even if he has not completed five years of service.
Calculation of gratuity: The amount of gratuity payable to an employee is calculated based on the employee's last drawn salary and the length of service. The formula for the calculation of gratuity is as follows:
Gratuity = (15/26) x Last drawn salary x Completed years of service
In this formula, "last drawn salary" refers to the employee's salary at the time of retirement or resignation. "Completed years of service" refers to the number of years and any part of a year that the employee has worked for the employer.
Ceiling on Gratuity: The maximum amount of gratuity that can be paid under the Payment of Gratuity Act, 1972 is Rs. 20 lakhs. This ceiling applies to all employees, regardless of their salary or length of service.
Payment of Gratuity: Gratuity must be paid to an employee within 30 days from the date it becomes payable. If the gratuity is not paid within this period, the employer is liable to pay simple interest at the rate specified by the government.
Nomination: The employee can nominate one or more persons to receive the gratuity in case of his death. The nomination must be made in writing and submitted to the employer.
Penalties: Failure to comply with the provisions of the Payment of Gratuity Act, 1972 can result in penalties and legal action against the employer.
The Payment of Gratuity Act, 1972 provides a significant social security benefit to employees who have completed five years of continuous service with an employer. The Act outlines the eligibility criteria, calculation of gratuity, the ceiling on gratuity, payment of gratuity, nomination, and penalties for non-compliance. Employers are required to comply with the provisions of the Act and provide gratuity to eligible employees within the stipulated timeframe.