Chapter V - Gratuity

53. 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; or

       (c) on his death or disablement due to accident or disease; or

      (d) on termination of his contract period under fixed term employment; or

       (e) on happening of any such event as may be notified by the Central Government:

    Provided that in case of working journalist as defined in clause (f) of section 2 of the Working
Journalists and Other Newspaper Employees (Conditions of Service) and Miscellaneous Provisions Act,
1955 (45 of 1955), the expression “five years” occurring in this sub-section shall be deemed to be three
years:

    Provided further 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 or expiration of fixed
term employment or happening of any such event as may be notified by the Central Government:

    Provided also that 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, and where any such nominees or heirs is a minor,
the share of such minor, shall be deposited with the competent authority as may be notified by the


 By Corrigenda dated 29-9-2020.

appropriate Government who shall invest the same for the benefit of such minor in such bank or other
financial institution, as may be prescribed by the appropriate Government, until such minor attains majority.

    (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 or such number of days as may be notified by the
Central Government, based on the rate of wages last drawn by the employee concerned:

    Provided that 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 three 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:

    Provided further that 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 seven days' wages
for each season:

    Provided also that in the case of an employee employed on fixed term employment or a deceased
employee, the employer shall pay gratuity on pro rata basis.

    (3) The amount of gratuity payable to an employee shall not exceed such amount as may be notified by
the Central Government.

    (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.

    (6) Notwithstanding anything contained in sub-section (1),—

        (a) the gratuity of an employee, whose services have been terminated for any act, wilful omission
    or negligence causing any damage or loss to, or destruction of, property belonging to the employer,
    shall be forfeited to the extent of the damage or loss so caused;

        (b) the gratuity payable to an employee may be wholly or partially forfeited—

               (i) if the services of such employee have been terminated for his riotous or disorderly conduct
        or any other act of violence on his part, or

                (ii) if the services of such employee have been terminated for any act which constitutes an
        offence involving moral turpitude, provided such offence is committed by him in the course of his
       employment.

    Explanation 1.— For the purposes of this Chapter, employee does not include any such person who
holds a post under the Central Government or a State Government and is governed by any other Act or by
any rules providing for payment of gratuity.

    Explanation 2.— For the purposes of this section, 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.

    Explanation 3.— For the purposes of this section, it is clarified that in the case of a monthly rated
employee, the fifteen days' wages shall be calculated by dividing the monthly rate of wages last drawn by
him by twenty-six and multiplying the quotient by fifteen.

54. Continuous service.—For the purposes of this Chapter,—

    (A) an employee shall be said to be in continuous service for a period if he has, for that period, been in
uninterrupted service, including service which may be interrupted on account of sickness, accident, leave,
absence from duty without leave (not being absence in respect of which an order treating the absence as
break in service has been passed in accordance with the standing orders, rules or regulations governing the
employees of the establishment), lay-off, strike or a lock-out or cessation of work not due to any fault of


the employee, whether such uninterrupted or interrupted service was rendered before or after the
commencement of this Code;

    (B) where an employee (not being an employee employed in a seasonal establishment) is not in
continuous service within the meaning of clause (A), for any period of one year or six months, he shall be
deemed to be in continuous service under the employer—

        (a) for the said period of one year, if the employee during the period of twelve calendar months
    preceding the date with reference to which calculation is to be made, has actually worked under the
   employer for not less than—

               (i) one hundred and ninety days, in the case of any employee employed below the ground in a
       mine or in an establishment which works for less than six days in a week; and

                (ii) two hundred and forty days, in any other case;

        (b) for the said period of six months, if the employee during the period of six calendar months
    preceding the date with reference to which the calculation is to be made, has actually worked under the
   employer for not less than—

               (i) ninety-five days, in the case of an employee employed below the ground in a mine or in an
        establishment which works for less than six days in a week; and

                (ii) one hundred and twenty days, in any other case.

       Explanation.— For the purposes of this clause, the number of days on which an employee has
    actually worked under an employer shall include the days on which—

               (i) he has been laid-off under an agreement or as permitted by standing orders made under the
         Industrial Employment (Standing Orders) Act, 1946 (20 of 1946), or under the Industrial Disputes
        Act, 1947 (14 of 1947), or under any other law applicable to the establishment;

                (ii) he has been on leave with full wages, earned in the previous year;

                (iii) he has been absent due to temporary disablement caused by accident arising out of and in
        the course of his employment; and

              (iv) in the case of a female, she has been on maternity leave; so, however, that the total period
        of such maternity leave does not exceed twenty-six weeks;

    (C) where an employee, employed in a seasonal establishment, is not in continuous service within the
meaning of clause (A), for any period of one year or six months, he shall be deemed to be in continuous
service under the employer for such period if he has actually worked for not less than seventy-five per cent.
of the number of days on which the establishment was in operation during such period.

55.  Nomination.—(1) Each employee, who has completed one year of service, shall make, a
nomination within such time, in such form and in such manner, as may be prescribed by the appropriate
Government.

    (2) An employee may, in his nomination, distribute the amount of gratuity payable to him under this
Chapter amongst more than one nominee.

    (3) If an employee has a family at the time of making a nomination, the nomination shall be made in
favour of one or more members of his family, and any nomination made by such employee in favour of a
person who is not a member of his family shall be void.

    (4) If at the time of making a nomination the employee has no family, the nomination may be made in
favour of any person or persons but if the employee subsequently acquires a family, such nomination shall
forthwith become invalid and the employee shall make, within such time as may be prescribed by the
appropriate Government, a fresh nomination in favour of one or more members of his family.

    (5) A nomination may, subject to the provisions of sub-sections (3) and (4), be modified by an employee
at any time, after giving to his employer a written intimation in such form and in such manner as may be
prescribed by the appropriate Government, of his intention to do so.


    (6) If a nominee predeceases the employee, the interest of the nominee shall revert to the employee
who shall make a fresh nomination, in the form prescribed by the appropriate Government, in respect of
such interest.

    (7) Every nomination, fresh nomination or alteration of nomination, as the case may be, shall be sent
by the employee to his employer, who shall keep the same in his safe custody.

56. Determination of amount of gratuity.—(1) A person who is eligible for payment of gratuity under
this Chapter or any person authorised, in writing, to act on his behalf shall send a written application to the
employer, within such time and in such form, as may be prescribed by the appropriate Government, for
payment of such gratuity.

    (2) As soon as gratuity becomes payable, the employer shall, whether an application referred to in sub-
section (1) has been made or not, determine the amount of gratuity and give notice in writing to the person
to whom the gratuity is payable and also to the competent authority specifying the amount of gratuity so
determined.

    (3) The employer shall arrange to pay the amount of gratuity within thirty days from the date it becomes
payable to the person to whom the gratuity is payable.

    (4) If the amount of gratuity payable under sub-section (3) is not paid by the employer within the period
specified in sub-section (3), the employer shall pay, from the date on which the gratuity becomes payable
to the date on which it is paid, simple interest at such rate, not exceeding the rate notified by the Central
Government from time to time for repayment of long term deposits:

    Provided that no such interest shall be payable if the delay in the payment is due to the fault of the
employee and the employer has obtained permission in writing from the competent authority for the delayed
payment on this ground.

    (5) (a) If there is any dispute as to the amount of gratuity payable to an employee under this Chapter or
as to the admissibility of any claim of, or in relation to, an employee for payment of gratuity, or as to the
person entitled to receive the gratuity, the employer shall deposit with the competent authority such amount
as he admits to be payable by him as gratuity.

    (b) Where there is a dispute with regard to any matter or matters specified in clause (a), the employer
or employee or any other person raising the dispute may make an application to the competent authority in
the form prescribed by the appropriate Government for deciding the dispute.

    (c) The competent authority shall, after due inquiry and after giving the parties to the dispute a
reasonable opportunity of being heard, determine the matter or matters in dispute and if, as a result of such
inquiry any amount is found to be payable to the employee, the competent authority shall direct the
employer to pay such amount or, as the case may be, such amount as reduced by the amount already
deposited by the employer.

    (d) The competent authority shall pay the amount deposited, including the excess amount, if any,
deposited by the employer, to the person entitled thereto.

    (e) As soon as may be after a deposit is made under clause (a), the competent authority shall pay the
amount of the deposit—

          (i) to the applicant where he is the employee; or

           (ii) where the applicant is not the employee, to the nominee or, as the case may be, the guardian of
    such nominee or heir of the employee if the competent authority is satisfied that there is no dispute as
    to the right of the applicant to receive the amount of gratuity.

    (6) For the purpose of conducting an inquiry under sub-section (5), the competent authority shall have
the same powers as are vested in a court, while trying a suit, under the Code of Civil Procedure, 1908 (5 of
1908), in respect of the following matters, namely:—

        (a) enforcing the attendance of any person or examining him on oath;

        (b) requiring the discovery and production of documents;


         (c) receiving evidence on affidavits;

        (d) issuing commissions for the examination of witnesses.

    (7) Any inquiry under this section shall be a judicial proceeding within the meaning of section 193,
section 228 and for the purpose of section 196 of the Indian Penal Code (45 of 1860).

    (8) Any person aggrieved by an order under sub-section (5) may, within sixty days from the date of the
receipt of the order, prefer an appeal to the appropriate Government or such other authority as may be
specified by the appropriate Government in this behalf:

    Provided that the appropriate Government or the appellate authority, as the case may be, may, if it is
satisfied that the appellant was prevented by sufficient cause from preferring the appeal within the said
period of sixty days, extend the said period by a further period of sixty days:

    Provided further that no appeal by an employer shall be admitted unless at the time of preferring the
appeal, the appellant either produces a certificate of the competent authority to the effect that the appellant
has deposited with him an amount equal to the amount of gratuity required to be deposited under sub-
section (5), or deposits with the appellate authority such amount.

    (9) The appropriate Government or the appellate authority, as the case may be, may, after giving the
parties to the appeal a reasonable opportunity of being heard, confirm, modify, or reverse the decision of
the competent authority.

57. Compulsory insurance.—(1) With effect from such date as may be notified by the appropriate
Government in this behalf, every employer, other than an employer or an establishment belonging to, or
under the control of, the Central Government or a State Government, shall, subject to the provisions of sub-
section (2), obtain an insurance in the manner prescribed by the Central Government, for his liability for
payment towards the gratuity under this Chapter, from any insurance company regulated by the Authority
as defined under clause (b) of sub-section (1) of section 2 of the Insurance Regulatory and Development
Authority Act, 1999 (41 of 1999):

    Provided that different dates may be appointed for different establishments or class of establishments
or for different areas.

    (2) The appropriate Government may, subject to such conditions as may be prescribed by the Central
Government, exempt any employer who had already established an approved gratuity fund in respect of his
employees and who desires to continue such arrangement, and every employer employing five hundred or
more persons who establishes an approved gratuity fund in the manner prescribed by the Central
Government from the provisions of sub-section (1).

    (3) For the purposes of effectively implementing the provisions of this section, every employer shall
within such time as may be prescribed by the Central Government get his establishment registered with the
competent authority in the manner prescribed by the appropriate Government and no employer shall be
registered under the provisions of  this  section unless he has taken an insurance  referred  to  in
sub-section (1) or has established an approved gratuity fund referred to in sub-section (2).

    (4) The appropriate Government may provide for the composition of the Board of Trustees of the
approved gratuity fund and for the recovery by the competent authority of the amount of the gratuity payable
to an employee from the insurer with whom an insurance has been taken under sub-section (1), or as the
case may be, the Board of Trustees of the approved gratuity fund, in such manner as may be prescribed.

    (5) Where an employer fails to make any payment by way of premium in respect of the insurance
referred to in sub-section (1) or by way of contribution to an approved gratuity fund referred to in
sub-section (2), he shall be liable to pay the amount of gratuity due under this Chapter (including interest,
if any, for delayed payments) forthwith to the competent authority.

    Explanation.— In this section, “approved gratuity fund” shall have the same meaning as assigned to it
in sub-section (5) of section 2 of the Income-tax Act, 1961 (43 of 1961).

58. Competent authority.—(1) The appropriate Government may, by notification, appoint any officer
of that Government having such qualifications and experience as may be prescribed by that Government to


be a competent authority for implementation of any provision of this Chapter for such area as may be
specified in the notification.

    (2) Where more than one competent authority has been appointed for any area, the appropriate
Government may, by general or special order, regulate the distribution of business among them.

    (3) Any competent authority may, for the purpose of deciding any matter referred to him for decision
under this Chapter, choose one or more persons possessing special knowledge of any matter relevant to the
matter under reference to assist him in holding the inquiry relating thereto.





                            CHAPTER VI
                              MATERNITY BENEFIT