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Unit 7: The Payment of Gratuity Act, 1972

Under Section 7(1) a person who is eligible for payment of gratuity under this Act or any person Notes
authorised in writing, to act on his behalf shall send a written application to the employer
withing such time and in such form as may be prescribed , for payment of such gratuity. Under
section 7(2) as soon as gratuity becomes payable, the employer shall, whether an application
referred to in the Sub-section (1) has been made or not, determine the amount of gratuity and
give notice in writing to the person to whom the gratuity is payable and also to the controlling
authority specifying the amount of gratuity determined. Under section 7(3) the employer shall
arrange to pay the amount of gratuity within thirty days from the date it became payable to the
person to whom the gratuity is payable. Section 7(3-A) states, if the amount of gratuity payable
under Sub- (3) is not paid by the employer within the period Specified in Sub- (3), the employer
shall pay, from to the date on which the gratuity become payable to the date on which it is paid,
simple interest at such rate, not exceeding the rate notified by the Central Government from
time to time for repayment of long term deposits, as that Government may by notification
Specify.
(ii) Provision regarding reduction and forfeiture of gratuity: Under Section 4(6) of the Act,
following provisions regarding reduction and forfeiture of gratuity are laid down as follows:
(i) According to section 4(6) (a), the gratuity payable to an employee, whose services have been
terminated for any act due to wilful omission, or negligence causing any damage or loss to or
destruction of property belonging to the employer, shall be forfeited to the extent of the damage
or loss so caused.
(ii) According to Section 4(6) (b), the gratuity payable to an employee may be wholly or partially
forfeited:

(a) If the Services of such an employee have been terminated for his riotous or disorderly
conduct or any other act of violence on his part
(b) If the services of such an employee have been terminated for any act which constitutes an
involving moral turpitude provided that such offence is committed by him in the course of his
employement.

(iii) Provision regarding recovery of gratuity: Regarding the recovery of the amount of gratuity
procedure has been laid down under section 8 of the Act as follows:
(a) If the amount of gratuity is not paid by the employer within the prescribed time, the person
has then right to apply to the controlling authority for the recovery the gratuity.
(b) The controlling authority will issue a certificate for the amount to the collector Then, the
collector shall recover the amount to the person.
(iv) Provision of Compulsory Insurance: Under Section 4(A), following provision are laid down
regarding the compulsory Insurance:

(a) The amendment Act of 1987 of Act Payment of Gratuity Act provides for compulsory insurance
of employer's liability to pay gratuity under the Act.
(b) This new section also provides for compulsory registration of all the establishments covered
under the Act with the controlling authority appointed by the Government.
(c) This Sections empowers the Central Government to make rules for prescribing the insurers
other than the LIC and the manner in which the employer shall get the insurance cover.
(d) Where an employer fails to make any payment by way of premium to the insurer or by way
of contribution to an approved gratuity fund referred to above, he shall be liable to the amount
of gratuity due under this Act.

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