Payment of Gratuity Act, 1972
Object: It is an Act to provide for a scheme for the payment of gratuity to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, and shops or other establishments.
Applicability: Any Employer of the above noted establishments where 10 or more persons are employed or were employed on any day of the preceding 12 months is liable to pay gratuity to its employees. Once the Act becomes applicable, it continues even if the number of employees falls below ten.
Entitlement: Gratuity is payable to an employee (nominee - in case of death of employee) who has rendered continuous service of five years or more on his termination of employment, superannuation, retirement or resignation. Completion of continuous service of five years is not necessary where the termination of employment is due to death of disablement.
Calculation: W x Y x 15/26 where W = Last Wage drawn i.e., basic + DA
Y = number of completed years of continuous service (six months or less to be ignored and more than six months to be counted as full year.
15 = 15 days salary
26 = No. of working days in a month.
Maximum Limit: Rs.3.5 lacs. (w.e.f 24-09-1997)
Time Limit for application to employer: Employee has to make an application in Form-I to his employer within 30 days from the date of gratuity becomes payable.
To calculate the gratuity: it has the formula
Ex. Number of yrs of service x Last salary drawn (Basic+D.A) X 15
This is the formula to calculate the gratuity.
We had one employee who was asked to leave the company in 2005. At that time we did not calculate the gratuity properly out of ignorance (not based on the last wages but average of wages over 10 years). He went to the court to seek justice. We now know that the gratuity was not calculated properly.
He never made an application in form-I as mentioned in the post above.
Can we now ask him to make an application and close the issue?
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