Page 262 - DMGT516_LABOUR_LEGISLATIONS

Unit 10: Provident Fund and Gratuity Payment Acts

An employer, who fails to remit the contributions and administrative charges and/or submit Notes
the monthly and other periodical returns, is liable to be prosecuted under Section 14 of the Act.
For failure to remit employees' share recovered from the wages, the employer shall also be
liable for prosecution under Section 406/409 of the I.P.C.
The employers are liable for action under the penal provisions of the Act, in case they default
compliance with the provisions of the Scheme. This is apart from the provisions relating to
levying of penal damages and recovery of the outstanding dues as revenue under the Revenue
Recovery Act.

Appraisal of the Act

Corruption by the enforcement officers has been a serious problem facing the organisation,
since joining the scheme is compulsory and the subscription rate being high, many of the
smaller companies avoid joining the scheme. The organisation, having legal powers to prosecute
such companies, and make ad-hoc assessments and recover past arrears including interest and
penalty, many of the field official connive with such companies for consideration. The interest
rate being offered to subscribers is still very high and the investment of the corpus of fund by the
organisation is not fetching such interest, resulting in drawal from surplus. This is a major
concern for government and the organisation.

Task Critically analyse he challenges which the employees faces in getting their
provident fund after leaving the organisation.

10.8 Payment of Gratuity Act, 1972

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. 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.
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,

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

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