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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 and
  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.


  1. The quantum of gratuity is to be computed at the rate of 15 days wages (7 days in case of seasonal establishments) based on rate of wages last drawn by the employee concerned for every completed year of service or part thereof exceeding 6 month.
  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 / 26 * 15 days * No. of years service
  2. Max. Gratuity Payable under the Act is Rs. 10,00,000/- (w.e.f. 24-05-2010)

Penal Provision

Non-payment 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 contraventions/offences attract imprisonment up to 1 year and/or fine up to Rs.10,000/-