The cases of gratuity payment are covered under payment of gratuity act and rules. The employer will have to pay the amount of gratuity within 30 days from the date the person retires or his employment is terminated. If the amount is not paid by the employer within the specified time period, he will be liable to pay the simple interest on the amount from the date on which the gratuity becomes payable.The rate of interest will be fixedin consistency with the guidelines laid down by the Central Government. It can be paid through the preferred mode of payment either in cash, demand draft or bank cheque.

Claiming Gratuity from Court
Claiming Gratuity from Court

Section 4 of Payment of Gratuity Act, 1972 governs the provisions in such cases as follows:

Section 4, Payment of Gratuity– (1) 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,

(a) on his superannuation, or

(b) on his retirement or resignation,

(c) 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.

(2) For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days’ wages based on the rate of wages last drawn by the employee concerned.

(3) The amount of gratuity payable to an employee shall not exceed 4[ten lakh rupees].

(4) For the purpose of computing the gratuity payable to an employee who is employed, after his disablement, on reduced wages, his wages for the period preceding his disablement shall be taken to be the wages received by him during that period, and his wages for the period subsequent to his disablement shall be taken to be the wages as so reduced.

(5) Nothing in this section shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer.

Procedure to claim gratuity amount

An employee can send an application to the employer for payment of the desired gratuity either himself or through his legal representative. The moment gratuity becomes payable, it is calculated by the employer.

After that, the employer sends in writing a notice to the eligible person.He also sends it to the controlling authority after specifying the amount determined.The employer must pay the amount of gratuity within thirty days from the date it becomes payable to the person to whom the gratuity is payable.

What happens in case of failure of gratuity payment?

Payment of gratuity is a statutory requirement. In case an employer fails to pay a gratuity amount to an employee, he will be punished.  There is a punishment of imprisonment for a term which shall not be less than six months but which may extend to two years for employers failing to make gratuity payment.

Any employer who isdefaulting in complying with any of the provisions of the Act or any rule shall be punishable with imprisonment for a term which shall not be less than three months but which may extend to one year or with fine which shall not be less than ten thousand rupees but which may extend to twenty thousand rupees, or with both.

If an employer makes any false statement or false representation in order to avoid any payment to be made by himself under the Act or of enabling any other person to avoid such payment shall be punishable with imprisonment for a term which may extend to six months or with fine which may extend to ten thousand rupees or with both.

The remedy in case the employer does not pay gratuity.

If the amount of gratuity is not paid by the employer within the prescribed time to the said person, he/she has the right to file a complaint to the Controlling Authority under the Payment of Gratuity Act within the area where the employer’s establishment is situated or where the employee was working at the time of termination. Moreover, the aggrieved person can also approach Labour Courts to get relief and justice.

You can refer the following case for more clarification.

Facts of a case:

  • Satish Kumar Sainiworked for five years in M/S Sarthak Logistic Pvt. Ltd. The company as a regional manager. He resigned from the post after the notice period and claimed his gratuity.
  • He joined the company on May 17, 2011, and resigned on December 17, 2016. Under the notice period, he worked till January 8, 2017. The company was asked to pay a sum of Rs. 65,770 as gratuity payment but the company refused to pay the gratuity amount.

Satish met the company officials many times, but it didn’t help. He sent a  legal notice to the company asking for the amount but the company refused again.

  • Satish filed a complaint in the consumer forum. The forum asked the company to come and justify themselves, but no one came.
  • Notices were sent to the director of the company, but no one paid heed to it. After the lapse of 30 day time period, on October 29, 2018, forum continued the case and declared their judgment.
  • According to the judgment of the forum, the company was asked to pay the gratuity sum along with a 9 percent rate.
  • Along with this, they were charged Rs. 10,000 for mental and bodily harassment. The forum also fined the defaulting company with Rs. 5,000.

According to the proceedings of the forum, it was held on November 28, 2007 by the national consumer disputes redressal commission in the case of Venkatesh and others v. Vishwanath and others that according to section 4 of gratuity act, 1972, if a person has worked for five years in the same company for a continuous period, then he is eligible to get gratuity amount.

This gratuity will be paid on his retirement, resignation, or death or getting disabled due to any other disease or accident.

This post is written by Damini Aggarwal of Punjab University (2020 batch). For more info on subject, please dial 99888-17966.