Write a note on ‘Payment of Gratuity Act, 1972’.

divya-anil | Student

(1)            The payment of Gratuity Act was passed in 1972.

The West Bengal Government first passed an ordinance in 1971. Later, the Indian Labour Conference & the Labour Ministers at their meetings felt the need for a central law on Gratuity. The model of West Bengal was accepted, except the provision that gratuity should be forfeited in case of dismissal or gross misconduct.

 This Act has a wide coverage  & includes all factories, mines, oil fields,  plantations, ports, railways, shops or establishments as specified by a Central Government notification.


(1)   Any person employed on wage / 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 yrs of service.

 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.

Calculation of Gratuity : -


Gratuity =   Monthly Salary /26      X      15 days      X      No. of yrs of service. 

Maximum Gratuity payable under the Act is Rs. 3,50,000 / - (w.e.f. – 24-09-1997).

Non payment of gratuity payable under the Act is punishable with imprisionment upto 2 yrs (minimum 6 months) and / or fine up to Rs. 20,000 / - Other contravention / offenses attract imprisonment upto 1 yr and / or fine upto Rs. 10,000.