Page 134 - DMGT306_MERCANTILE_LAWS_II

Unit 7: The Payment of Gratuity Act, 1972

Notes
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Caution For every completed year of service or apart, thereof its excess of six months, the
employer has to pay gratuity to an employee at the rate of 15 days wages based on the rate
of wages last drawn by the concerned employee. In the case of Piece-rated employee, daily
wages are computed on the average of the total wages received by him for a period of 3
months immediately preceding the termination of his employment. For this purpose, the
wages paid for any overtime work will not be taken into account. In the case of an employee
employed in a seasonal establishment, and who is not so employed throughout the year,
the employer shall pay gratuity at the rate of 7 days wages for each season. The amount of
gratuity payable to an employee is not to exceed rupees three lakhs and fifty thousand.
The right of employees to receive better terms of gratuity under any award or agreement or
contract with the employer is not taken away by this Act.

7.5.1 Forfeiture

If the services of an employee have been terminated for any act of willful omission or negligence
causing any damage or loss to, or destruction of, property belonging to the employer, his
gratuity can be forfeited to the extent of the damage or loss so caused to the employer. The
gratuity payable to an employee can be wholly forfeited, if the services of such employee have
been terminated for his riotous or disorderly conduct - or any other act of violence or an offence
involving moral turpitude committed by him in the course of his employment.

7.5.2 Exemption

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.

Did u know? Gratuity has been exempted from attachment in execution of any decree or
order of any Civil, Revenue or Criminal Court. This relief is aimed at providing payment
of gratuity to the person or persons entitled there to without being affected by any order
of attachment by a decree of any Court.

7.5.3 Nomination

An employee who has completed one year of service has to name his/her nominee in the
prescribed form. An employee in his nomination can distribute the amount of gratuity amongst
more than one nominee. If an employee has a family at the time of making the nomination, it
has to be made in favour of one or more members of the family. If nomination is made in favour
of a person who is not a member of his family, the same is void. However, if the employee has
no family at the time of making a nomination, he can make the nomination in favour of any
person. But is such employee acquires a family subsequently, then such nomination becomes
invalid forthwith, and thereafter the employee has to make a fresh nomination in favour of one
or more members of his family: Nomination once made can be modified after giving due notice
to the employer, If a nominee predeceases the employee, a fresh nomination is required to be
made:

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