Payment Of Gratuity Act, 1972


Every factory, mine, oil field, plantation, port, railways, company, shop, establishment or educational institutions employing 10 or more persons, Sec - 1


All employees Irrespective of status or salary shall be covered under this Act.


Gratuity shall be payable to an employee on separation from employment due to any of the following reasons, after he has rendered continuous service* for not less than five years:

  • (a) on his superannuation, or
  • (b) on his retirement / registration, or
  • (c) on his death or disablement due to accident or disease

Continuous Service

*Continuous Service means, that the employee shall be deemed to be in continuous service even under the following circunstances:

  • i) If he has been laid-off
  • ii) If he has been on leave with full wages
  • iii) If he has been absent due to temporary disablement caused by accident arising out of and in the course of his employment; and
  • iv) In the case of a female, if she has been on maternity leave, however, that the total period of such maternity leave does not exceed twelve weeks.
  • Nomination

    To be obtained by employer after expiry of one year's service, in Form 'F'. Sec.6, Rule 6

    Method Of Calculation

    General Calculation: Last drawn Basic (or Wages) [/] 26[x]15[x] Service Length, where: 26 is the no. of days assumed for a whole month, and 15 is the no. of days for which the payment is to be made, and Service Length is the no. of years of service(not less than 5 year) Sec.2(s)
    Piece Rate Based Calculation: @15 days' wages for every completed year on an average of 3 months' wages.
    Seasonal Based Calculation: @7 days' wages for every completed year of service.

    Maximum Limit

    Payment of Gratuity not to exceed Rs.10,00,000. Sec-4(3)

    Mode of Payment

    Cash or, if so desired, by beneficiary, by Bank Draft or Cheque. Rule-9

    Display of Notice

    On conspicuous place at the main entrance in English language or the language understood by majority of employees of factory, etc Rule-4

    Protection of Gratuity

    Can not be attached in execution of any decree. Sec-13

    Recovery of Gratuity

    Cancerned employee / beneficiary to apply within 30 days in Form-I when not paid by the employer within 30 days


    As per the provisions of the Act, Gratuity of an employee can be forfeited, if his services have been terminated for any act, willfull omission or negligence causing any damage or loss to, or destruvtion of, property belonging to the Company to the extent of damage or loss so caused.

    Penal Provision

    Imprisonment for 6 months or fine upto Rs.10,000 for avoiding to make payment by making false statement or representation
    Imprisonment not less than 3 months and upto one year with fine on default in complying with the provisions of Act or Rules.