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The Payment of Gratuity Act, 1972 is an important social security legislation in India that provides a lump sum payment to employees as a token of appreciation for their long and meritorious service upon retirement, resignation, death, or incapacitation due to disability.

Key provisions of the Payment of Gratuity Act, 1972:

  1. Applicability: The act applies to every establishment, factory, mine, oilfield, plantation, port, railway company, or shop where 10 or more employees are or were employed on any day in the preceding 12 months.
  2. Eligibility for Gratuity: An employee is eligible for gratuity if they have completed at least five years of continuous service in the establishment.
  3. Calculation of Gratuity: The gratuity amount is calculated based on a formula that includes 15 days’ wages for every completed year of service, subject to a maximum of Rs. 20 lakh (as of the latest amendment in 2018).
  4. Conditions for Forfeiture of Gratuity: The act allows for the forfeiture of gratuity if an employee is terminated for disorderly conduct, willful damage to property, or any other act of violence.
  5. Nomination: Employees are allowed to nominate a person (usually a family member) to receive the gratuity in case of the employee’s death.
  6. Time Limit for Payment: Gratuity is to be paid within 30 days from the date it becomes payable. If there is any delay, the employer may have to pay interest on the gratuity amount.

Amendments to the Payment of Gratuity Act:

The Payment of Gratuity Act has been subject to amendments over the years to enhance benefits for employees and to keep it in line with economic and labor market changes. Some of the significant amendments include:

  1. Amendment of 1984: The amendment raised the ceiling on gratuity from Rs. 20,000 to Rs. 50,000.
  2. Amendment of 1994: This amendment raised the ceiling on gratuity to Rs. 1,00,000.
  3. Amendment of 2010: This amendment raised the ceiling on gratuity to Rs. 3,50,000.
  4. Amendment of 2018: The most recent amendment in 2018 raised the maximum limit of gratuity payable to Rs. 20 lakh. This was a significant increase from the previous limit of Rs. 10 lakh.

These amendments were made to ensure that the Payment of Gratuity Act remains relevant and beneficial to employees in the changing economic landscape. They aimed to enhance the gratuity benefits provided to employees and their families, thereby promoting employee welfare and social security.