The Payment of Gratuity Act,1972 deals with provisions for gratuity and imposes duty up one very establishment covered under this Act to provide benefit sunder  this Act to all the eligible employees


  • This Act applies to every shops or establishments with in the meaning of any law for the time being in force in a State, in which 10 or more persons are employed or were employed on any day of the preceding 12 months
  • A shop or establishment to which this Act has become applicable shall continue to be government   under this Act not with standing the number of persons employed there in at any time after it has become applicable


  • Every employee shall be eligible for the gratuity if he/she has completed 5 years of continuous service
  • If the person has worked for 5 year sand 6 months,then he is deemed to have worked for 6 years but less than 6 months not to be considered

  • The gratuity shall be payable to an employee on termination of his employment after he has rendered continuous service for not less than  year or,

    • On his superannuation,or
    • On his retirement, or where his death or total disablement the condition of 5 years complete service will not beapplicable

    For every completed year of service or part thereof in excess of six months the employer shall pay gratuity to an employee at the rate of fifteen days’ wages based on the rate of wages last drawn by the employee concerned


  1. The employee who intends to nominate shall have completed one year or service
  2. He shall make such nomination within thirty days of completion of one year service in Form F in duplicate and either personally deliver it to the employer or send it by registered post with acknowledgementdue
  3. Theemployer after verifying the employee’s details in nomination form shall

record the nomination after acknowledging receipt thereof to the employee

  1. An employee who has no family at the time of nomination can make nomination in favor of any person or persons but if he acquires a family thereafter, he has to makea fresh nomination in Form G within ninety days in duplicate in favor of one or more members of family of one or more members of his family
  2. Anemployee who intends to modify his nomination, can do so, after giving written notice to the employer in Form H
  3. A nomination or fresh nomination or modification of nomination shall be duly signed by the employee or shall bear his thumb impression (if illiterate) in the presence of two witnesses (Section 6 r/w Rule6)


  1. The employee shall make an application in Form I to the employer within 30 days from the date on which it becomes payable either by personal service on the employer or by the registered post with acknowledgement due (Section 7 r/w Rule 7)

His nominee shall make an application in Form J within 30 days of to becoming payable. In case employee’s death, his legal heir can apply in Form K within one year to then employer (Section 7 r/w Rule 7)

  1. The employer shall calculate the gratuity in the manner stated as prescribed under the Act, as soon as the gratuity becomes payable whether or not an application is made (Section 7)
  2. The employer thereafter shall give the notice in Form L within 15 days of receipt of the application to the employee, or his nominee or his Legal heir under a copy the controlling  Such notice be served either by personal service against receipt or by registered post with acknowledgment due (Section 7 r/w Rule 8)
  3. If the gratuity is not payable, the employer shall give the notice in Form M, to the employee or his nominee or his legal heir with the reason for the same under a copy to the controlling Authority
  4. If the amount is payable, the employer shall arrange to pay the gratuity within 30 days from the date it becomes payable
  5. In case of nominee or legal heir, the employer shall obtain the witness to establish the identity of them


  1. Gratuity amount shall be paid in cashor
  2. Besent by demand draft or by bank cheque to the employee, nominee or legal heir as the case may be or
  3. Be sent by money order, if gratuity amount is less than Rupees 1000or
  4. In case of minor, the controlling authority shall invest the gratuity amount in SBI or its subsidiaries or nationalized bank (Rule9)



  1. Employer shall submit details regarding its opening in Form A to the controlling authority, within 30 days of the Act becoming applicable to the establishment (Rule3)
  2. Employer shall submit details to the Controlling Authority in Form C, within 60 days before the intended closure of the establishment (Rule3)
  3. Employer shall intimate change in name, address, employer or nature of business to the Controlling Authority in Form B (Rule3)
  4. Employer has to register his establishment with the Controlling authority. (Section4-A)
  5. If the employer has their own gratuity fund then her shall have to obtain the insurance cover as laid down under Section 4-A of theAct
  6. The amount of the gratuity shall be determined in terms of Section 7 of theAct
  7. Employer shall issue the notice of the payment to employee within the stipulated period and pay the gratuity within the prescribed time as per Section 8 read with Rule 7
  8. In case of the default by the employer, he is required to pay simple interest at the prescribed rate [Section 7 (3A)]
  9. He is required to furnish such information or such records and registers as are called for by the Inspector for inspection
  10. Employer shall display an abstract of the Act and Rules in Form U in English or such other language which can be understood by the employees (Rule 20)
  11. No deduction shall be made in the gratuity which is not permissible under the Act [Section 4(6)]




For not obtaining insurance for the employer’s liability for Gratuity

Fine upto Rupees 10000 and Rupees 2000 for each day of default for continuing the offence

For making false statement or false representation to avoid payment of gratuity

Six months imprisonment or with fine upto Rupees 10000 or both

For violating or non-compliance of any provision of the Act

Imprisonment minimum-3 months –maximum one year or fine – minimum Rupees 10000 or – maximum Rupees 20000

For non-payment of gratuity

Sentence minimum – 6 months maximum –two years


  • Obtaining shops & establishments registration & License.
  • Renewal of License as per schedule date.
  • Representing with Labour Department authorities on the behalf of the company on case-to-case basis with prior approval of the signing authority.
  • Preparing and submitting the half yearly and annual returns.
  • To maintain records and all registers in relation to the respective Act.
  • Verifying proper compliances of branches.
  • To keep abreast and update the organization about the recent changes of the Act.
  • To act as a proper communication link between the organization and statutory authorities.
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