Page 237 - DCOM207_LABOUR_LAWS

Labour Laws

Notes this Act applies or any employee or class of employees employed therein, from the operation
of the provisions of this Act, if in the opinion of the appropriate Government, the employees in
such establishment are in receipt of gratuity or pensionary benefits not less favourable than the
benefits conferred under this Act. Gratuity is a voluntary Payment made by the employer to the
employee in recognition of continuous, meritorious services and sincere efforts by the employee
towards the organization. It is governed under the Payment of Gratuity Act 1972. 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. The purpose
of this Unit is to enable the students to comprehend basic expressions. At the end of this unit you
should be able to understand various concepts the Payment of Gratuity Act.

14.1 Genesis of the Act

Gratuity as an additional retirement benefit has been secured by labour in numerous instances,
either by agreement or by awards. It was conceded as a provision for old age and a reward for
good, efficient and faithful service for a considerable period. But in the early stages, gratuity was
treated as a payment gratuitously made by an employer at his will and pleasure. In the course
of time, gratuity came to be paid as a result of bilateral agreements or industrial adjudication.
Even though the payment of gratuity was voluntary in character, it had led to several industrial
disputes. The Supreme Court had laid down certain broad principles to serve as guidelines for
the framing of the gratuity scheme. They were
1. The general financial stability of the concern;
2. Its profit-earning capacity;
3. Profits earned in the past;

4. Reserves and the possibility of replenishing the reserves; and
5. Return on capital, regard being had to the risk involved.
The first central legislation to regulate the payment of gratuity was the Working Journalists
(Conditions of Service) and Miscellaneous Provisions Act, 1955. The Government of Kerala
enacted legislation in 1971, for payment of gratuity to workers employed in factories, plantations,
shops and establishments. In 1971, the West Bengal Government promulgated an ordinance
which was subsequently replaced by the West Bengal Employees’ Payment of Compulsory
Gratuity Act, 1971. After the enactment of these two Acts, some other state governments also
voiced their intention of enacting similar measures in their respective states. It became necessary,
therefore, to have a Central law on the subject so as -

l z to ensure a uniform pattern of payment of gratuity to the employees throughout the
country, and
l z to avoid different treatment to the employees of establishment having branches in more
than one state, when, under the conditions of their service, the employees were liable to
transfer from one state to another.
Hence the Government of India enacted legislation on gratuity. The Act came into force from
September 16, 1972. The Payment of Gratuity Central Rules also came into force from September
16, 1.972.

Did u know? The Act is administered by the Central Government in:- (i) establishments
which are under its control; (ii) establishments having branches in more than one State; and
(iii) major ports, mines, oil fields and the railways. While, in all other cases, it is administered
by the State Governments and the Union Territory administrations. The appropriate
Government may, by notification, appoint any officer to be a controlling authority, who

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