Explain the salient features of the payment of gratuity act 1972?

Answer 1

This particular act passed by the Indian legislature was an attempt to give some level of rights to workers in the face of big business. In this sense, the concept of "gratuity" is different than what is presented in the West. This vision is one where workers receive settlement or severance packages after they have been terminated from their business of employment. It can be considered a type of pension or compensation for services rendered to the organization: Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years.

(i) on his superannuation; or

(ii) on his retirement or resignation; or

(iii) on his death or disablement due to accident or disease;

provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement. The act is designed to cover employees who work in minefields, oil rigs, railway companies, mines, and other industrial settings as such.

The Payment of Gratuity Act, 1972

A) Coverage: The Act implies to every factory, mine oilfield, plantation, port and Railway Company and to every shop or establishment in which 10 or more persons are employed, or were employed, on any day of the preceding 12 months. The Act makes all persons employed in the above establishments eligible for gratuity irrespective of their wages.

B) Administration:The Act is administered by a controlling authority appointed by the appropriate Government.

C) Benefits under the Act:Gratuity is payable to an employee on the termination of his employment after he has rendered continuous service for not less than 5yrs. The compensation of continuous service of five years is however, not necessary where the termination of the employment due to death or disablement. Gratuity is payable at the rate of 5 days wages based on the rate of wages last drawn by the employee for every completed year of service or part thereof in excess of six months. But the amount of gratuity payable to an employee shall not exceed Rs.3.5 lakhs.

D) Source of Funds:Under the Act, gratuity is payable entirely by the employer. For this purpose he is required either (I) to obtain insurance with the Life Insurance Corporation, or (ii) to establish a gratuity fund. Thus it is his liability to pay the premium in the first case and to make contribution in the second case.

Answer 2

The Payment of Gratuity Act, 1972 is a social security law in India that mandates employers to pay gratuity to employees who have completed at least five years of continuous service. The gratuity amount is based on a formula linked to the employee's last drawn salary and the number of years of service. The Act applies to establishments with ten or more employees and provides for a minimum gratuity amount to be paid.