Gratuity
1.1 Gratuity
Gratuity is a
kind of retirement benefit, like provident fund or pension. It is a payment
which is intended to help an employee after his retirement (due to
superannuation or physical disability). It is earned by an employee as a reward
for long and meritorious service with his present employer. [Indian Hume
Pipe Co. Ltd. v. Its Workmen]
The Payment of
Gratuity Act, 1972 was passed by
Parliament in August 1972 and came into force on 16th September 1972 . Its objective is to:
-
ensure the uniformity in payment
of gratuity to industrial workers throughout the country
-
avoid different treatment to industrial workers placed in different
states and liable to be transferred from one state to another.
1.2 Meaning of Gratuity
Gratuity is a
lump sum payment to an employee by his employer for his past services. It is a
kind of retirement benefit which an employee gets at the time of retirement or
when he leaves the establishment.
1.3 Extent of the Act
The Act extends
to the whole of India Jammu and Kashmir
1.4 Object of the Act
The object of
the Act is to ensure uniform pattern of payment of gratuity to the employees
throughout the country.
1.5 Application of the Act
a. every factory,
mine, oilfield, plantation, port and Railway Company
b. shops or establishments
(defined under the law) in which 10 or more persons are employed or were employed, on any day of the preceding 12 months. If
the number of employees falls below 10 in an establishment or any shop where
the Act became already applicable, shall continue to be governed by this Act. [K.
Gangadhar v. The Appellate Authority]
c. such other
establishments as the Central specify in this behalf. [Municipal Board v. Union of India
1.6 Non-Applicability of the Act on certain categories of
Employee
The Act is not
applicable to apprentices and to such person who holds a post under the Central
Government or a State Government and is governed by any other Act or by any
rules providing for payment of gratuity.
1.7 Definitions (Sec. 2)
1.7.1 Appropriate Government [Sec. 2 (a)]
In respect to
an establishment of a major port, mine, oilfield or railway company or having
branches in more than one State 'appropriate Government' means the Central
Government.
In any other
case, 'appropriate Government' means the State Government.
1.7.2 Completed year of service [Sec. 2 (b)]
It means
continuous service for 1 year.
1.7.3 Continuous Service [Sec. 2A]
a.
An employee is said to be in continuous service for a
period, if he has been in uninterrupted service during the period (except for
interruption due to sickness, accident, leave or absence from duty without
leave).
b.
Absence on account of lay-off, strike, a lock-out, cessation of work
not due to any fault of the employee do not cause interruption in ‘continuous
service’ (Sec. 2-A, Clause 1). [Dalmia
Magnesite Corpn., Salem Madras
c.
Where an employee (except employed in a seasonal
establishment) is not in continuous service for any period of 1 year, he shall
be deemed to be in continuous service under the employer for the said period of
1 year, if during the period of 12 calendar months preceding the date with
reference to which calculation is to be made, he has actually worked under the
employer for not less than :
-
190 days in the case of an employee employed below the
ground in a mine or any establishment which works for less than 6 days in a
week; and
-
240 days in any other case.
d.
For determining the continuous service for any period of 6
months for the payment of gratuity, the actual days worked should be half the
number of days required to work for continous service in 1 year ( 95 and
120 respectively).
e.
The number of days on which an employee has actually worked
under an employer shall include days on which the employee has been:
laid-off under an agreement or as permitted by standing
orders;
on leave with full wages, earned in the previous year;
absent due to temporary disablement caused by accident
arising out of and in the course of his employment;
on maternity leave not exceeding 12 weeks (for female
employees).
f.
Where an employee, employed in a seasonal establishment, is
not in continuous service for any period of 1 year or 6 months, he shall be
deemed to be in continuous service under the employer for such period if he has
actually worked for not less than 75 per cent of the number of days on which
the establishment was in operation during such period (Sec. 2-A, Clause 3). [Jeewanlal
(1929) Ltd., Calcutta
1.7.4 Employee [Sec. 2 (e)]
a.
Employee means any person (other than an apprentice)
employed on wages in any establishment to do any skilled, semi-skilled or
unskilled, manual, supervisory, technical, clerical, managerial or in
administrative capacity.
b.
However, the term does not include person who holds a post
under the Central or a State Government and is governed by any other Act or
rules providing for payment of gratuity. [General Manager, Yellamma Cotton, Woollen and Silk
Mills v. Regional Labour
Commissioner], [Bagi Beedi Factory v. Appellate Authority], [K. Velukutty Achary v. Harrisons Malayalam Ltd.], [Sir J.P. Srivastava Group of Industries v.
State of U.P.
c.
The teacher cannot be said to be an employee within the meaning of the
Act and conferring the benefits of the Act to a teacher is illegal [,Seth Soorajmal Jalan Balika
Vidyalaya (Secondary School) v.
The Controlling Authority, 2001
LLR 567 (Cal).]
But in case of General Educational Academy, Chembur, Mumbai v. Sudha Vasudeo Desai, 2001 LLR 627 the
Bombay High Court held and declared that the definition of employee in section
2(e) includes and covers in its compass the class of teacher employed in a
school.
1.7.5 Employer [Sec. 2 (f)]
The Term
Employer means:
i.
For establishment under the control of State or Central
Government, the authority appointed by the appropriate Government for the
supervision and control of employees
ii.
For local authority, the person appointed by such
authority for the supervision and control of employees (or the chief executive
officer of the local authority) [Sec. 2 (f) (ii)].
For other establishments,
'employer' means the person who has the ultimate control over the affairs of
the establishment. [Pattathurila K. Damodaran v. M. Kassim
Kanju]
1.7.6 Family [Sec. 2 (h)]
a.
In case of a male employee: himself, his children whether
married or unmarried, his dependent parents, and the dependent parents of his wife and the widow and children
of his predeceased son, if any
b.
In case of female employee: herself, her husband, her
children, whether married or unmarried, her dependent parents and the dependent
parents of her husband and the widow and children of her predeceased son, if
any.
1.7.7 Wages [Sec.
2 (s)]
Wages' means
all emoluments which are earned by an employee while on duty or on leave paid
or are payable to him in cash. It includes dearness allowance but does not
include bonus, commission, house rent allowance, overtime wages or any other
allowance. [Ambika Saw Mills v. Asstt.
Lab. Commr.]
1.7.8 Retirement
[Sec. 2 (q)]
It means
termination of the service of an employee otherwise than on superannuation.
1.7.9 Superannuation
[Sec. 2 (r)]
The term
'superannuation' means retirement of an employee on attainment of a certain
age.
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