How the payment of gratuity is made?

Payment of Gratuity : According to Section 4 Gratuity shall be payable to an employee on termination of his employment after he has rendered continuous service for not less than 5 years;

  • On his superannuation, or
  • On his retirement or resignation
  • On his death or disablement due to accident or disease.

Note : Disablement means such disablement as incapacitates an employee for the work which he was capable of performing before the accident or disease resulting in such disablement.

Payment to Nominee/heirs in case if death : The completion or continuous service of 5 years shall not be necessary where the termination of the employment of any employee is due to death or disablement.

In the case of death of the employee, gratuity payable to him shall be paid to his nominee or, if no nomination has been made, to his heirs. Where any such nominees or heirs is a minor, the share of such minor, shall be deposited with the controlling authority who shall invest the same for the benefit of such minor in such bank or other financial institution, as may be prescribed, until such minor attains majority.

Rate of Gratuity [Section 4(2)] : For every completed year of service or• part thereof in excess of 6 months, the employer shall pay gratuity to an employee at the rate of 15 days wages based on the rate of wages of last drawn by the employee concerned.In the case of a monthly rate employee, the 15 days wages shall be calculated by dividing the monthly rate of wages last drawn by him by 26 and multiplying the quotient by 15

How the payment of gratuity is made?

In the case of a piece rated employee, daily wages shall be computed on the average of the total wages received by him for a period of 3 months immediately preceding the termination of his employment and for this purpose, the wages paid for any overtime work shall not be taken into account.In the case of an employee who is employed in a seasonal establishment and who is not so.employed throughout the year, the employer shall pay the gratuity at the rate of 7 days wages for each season.

Maximum Amount of Gratuity Payable : The amount of gratuity payable to an employee shall not exceed Rs. 3,50,000.

Better terms of Gratuity : An employee may be entitled to receive better terms of gratuity under an award or agreement or contract with the employer.

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