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The Payment of Gratuity Act, 1972 is an important labor law in India that provides for the payment of gratuity to employees in recognition of their long and meritorious service. Here are the key features of the Payment of Gratuity Act, 1972:

  1. Applicability: The Act applies to every factory, mine, oilfield, plantation, port, railway company, shop, or other establishment where 10 or more employees are employed, or were employed, on any day of the preceding 12 months.
  2. Eligibility: Employees who have completed at least five years of continuous service with the same employer are eligible to receive gratuity under the Act. However, certain categories of employees, such as those covered under the Central Civil Services (Pension) Rules, are excluded from the Act’s provisions.
  3. Calculation of Gratuity: The gratuity amount is calculated based on the employee’s length of continuous service and the last drawn salary. The formula for calculating gratuity is: Gratuity = (Last drawn salary × 15/26) × Number of completed years of service.
  4. Payment of Gratuity: Gratuity is typically paid by the employer to the eligible employee upon termination of employment, whether due to retirement, resignation, death, or disablement due to accident or illness. It is a lump sum payment made to the employee or, in the case of death, to the nominee or legal heir.
  5. Nomination: The Act provides for the nomination of a beneficiary by the employee to receive the gratuity amount in case of the employee’s death. The employee can nominate one or more persons as nominees, and if there are multiple nominees, the gratuity amount is distributed among them according to the proportions specified in the nomination.
  6. Administration: The Act requires employers to maintain records of gratuity payments and nominations and to display notices informing employees about their rights under the Act. The appropriate government also appoints controlling authorities to enforce the provisions of the Act and adjudicate disputes related to gratuity.
  7. Penalties for Non-Compliance: Employers who fail to comply with the provisions of the Act, including the payment of gratuity to eligible employees, may be subject to penalties, fines, and legal proceedings.

The Payment of Gratuity Act, 1972, aims to provide financial security to employees after their retirement or termination of employment and to recognize their long and meritorious service to the organization. It serves as an important social security measure for employees in India.