Page 307 - DCOM404_CORPORATE_LEGAL_FRAMEWORK

Corporate Legal Framework

Notes 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,
1. To ensure a uniform pattern of payment of gratuity to the employees throughout the
country, and
2. 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.

Object of the Act

The Act provides for a scheme of compulsory payment of gratuity to employees engaged in
factories, mines, oilfields, plantations, ports, railway companies, motor transport undertakings,
shops or other establishments and for matters connected therewith or incidental thereto.

Applicability

The Act is applicable to:
1. Every factory, mine, oilfield, plantation, port and railway companies;
2. Every shop or establishment within the meaning of any law for the time being in force in
relation to shops and establishments in a state, in which 10 or more persons are employed
or were employed on any day of the preceding 12 months;
3. To every motor transport undertaking, in which 10 or more persons are employed or
were employed on any day of the preceding 12 months,
4. Such other establishments or class of establishments, in which 10 or more employees are
employed or were employed on any day of the preceding 12 months, as the Central
Government may, by notification, specify in this behalf.
The Act provides for the grant of exemption from the operation of the Act to any person or class
of persons, if they are in receipt of gratuity or pensioner benefits not less favourable than the
benefits conferred under the Act.

Employer’s Obligations

1. Every employer has to obtain insurance for his liability to pay gratuity from the LIC.
2. However, an employer who has already established an approved gratuity fund or who
having at least 500 employees establishes an approved gratuity fund may claim exemption
from such compulsory insurance.

3. Every employer shall get his establishment registered with the controlling authority
(Assistant Labour Commissioner).
4. Premium to the insurance company should be paid without fail, or the employer shall be
liable to pay the amount of gratuity payable to the controlling authority.
5. As soon as the gratuity becomes payable, the employer should determine the amount of
gratuity & give a notice in Form L to the payee viz. the employee or his nominee or legal
heir & to the controlling authority of that area.

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