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Payment of Gratuity Act,1972



  1. Every factory (as defined in Factories Act), mine, oilfield, plantation, port and railway.
  2. Every shop or establishment to which Shops & Establishment Act of a State applies in which 10 or more persons are employed at any time during the year end.
  3. Any establishment employing 10 or more persons as may be notified by the Central Government.
  4. Once Act applies, it continues to apply even if employment strength falls below 10.



  1. Any person employed on wages/salary.
  2. At the time of retirement or resignation or on superannuation, an employee should have rendered continuous service of not less than five years,
  3. In case of death or disablement, the gratuity is payable, even if he has not completed 5 years of service.
  • Benefits
  1. The quantum of gratuity is to be computed at the rate of 15 days wages (7 days wages in case of seasonal establishments) based on rate of wages last drawn by the employee concerned for every completed year of service or a part thereof exceeding 6 months.
  2. The total amount of gratuity payable shall not exceed the prescribed limit.
  3. In case where higher benefit of gratuity is available under any gratuity scheme of the Co., the employee will be entitled to higher benefit.
  • Calculation of Gratuity

  1. Gratuity = Monthly Salary x 15 days x No. of yrs. of service
  2. Max. Gratuity payable under the Act is Rs. 3,50,000/- (w.e.f. 24-9-1997)


Penal Provisions

Nonpayment of gratuity payable under the Act is punishable with imprisonment up to 2 years (minimum 6 months) and/or fine up to RS 20,000/-. Other contravention/offenses attract imprisonment up to 1 year and/or fine up to RS 10,000.






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