EMPLOYEE PROVIDENT FUND ACT1952 & THE PAYMENT OF GRATUITY ACT,1972

INTRODUCTION
The Employees Provident Funds & Miscellaneous Provisions Act, 1952 enacted by Parliament came into force w.e.f. 14.3.1952 and presently the following three Schemes are in operation under the Act:1. The Employees Provident Fund Scheme, 1952 2. Employees Pension Scheme, 1995 and 3. Employees Deposit Linked Insurance Scheme, 1976.
2

FUNDING OF THE SCHEME

Schemes Provident Fund Insurance Fund (EDLI) Pension Fund Total Employers 3.67% 0.5% 8.33% 12.5% Employees* 12% 0% 0% 12% Central Govt. 0% 0% 1.16% 1.16% Total 15.67% 0.5% 9.49% 25.66%

* Rate of contribution is 10% in respect of following establishments :less than 20 persons are employed. sick unit declared by the BIFR.

(contd)
Accumulated losses equal to or exceeding its entire network. Any establishment in the (a) Jute, (b) Beedi, (c) Brick, (d) Coir and (e) Gaurgum industry or factories Administrative Charges / Inspection Charges are applicable @ 1.10% and 0.18% respectively.

COVERAGE

APPLICATION OF THE ACT

All establishments / factories included in the list of notified industries and class of establishments as in Schedule I and employing 20 or more persons. Any other establishment employing 20 or more persons or class of establishments which the Central Government may notify. The Act will come into force in an establishment from the very date of set up or commencement of business except certain class of establishments as excluded under Section 16 of the Act
6

(contd)
Departments or branches of an establishment, situated in the same place or different places shall be treated as parts of the same establishment for coverage under the Act. The Act once applied will continue to apply to the establishment even if the number of employees fall less than 20 after coverage. The Act is applicable to cinema theatres employing 5 or more workers
7

VOLUNTARY COVERAGE
With the consent of the employer and majority of employees, an establishment otherwise not coverable can be covered under Section 1(4) of the Act..

MEMBERSHIP
- Persons / employees including regular, casual, piece rated, part time, temporary and contract employees. - Coverage from the date of joining the establishment / factory. - All employees getting the wages upto Rs. 6500/- per month. - In case of wages more than Rs. 6500/- p.m. on joint request by employee and employer
9

COMPLIANCE

10

ROLE OF COMPLIANCE
Coverage of all coverable establishments . Extending membership to all eligible employees in covered establishments . Ensuring proper implementation of Act & Scheme provisions
11

REGISTRATION
A registration number otherwise known as Code Number issued to every establishment / factory to which the Act is applied. Issued by RPFC under whose jurisdiction the establishment is located. In case of factory, code number is allotted by RPFC under whose jurisdiction factory is located. A contractor employing 20 persons and engaged in the work of different establishments may obtain a separate Code Number
12

(contd)
Normally Code Number is issued within 3 days on submission of requisite documents like proof of date of set up, Demand Draft towards PF dues for one month etc. All members be assigned with separate PF Account Number. The provisions of the Act applies to the establishment suo-moto, on fulfilling the conditions for the coverage
16

COLLECTION / RECEIPT OF CONTRIBUTIONS

Contributions in respect of each member as per specified rate received by the concerned RPFC. Maintenance of contribution card memberwise for each financial year. Deduction of employees share of PF from wages of the member before disbursement.

17

(contd)
A member is required to contribute compulsorily upto Rs. 6500/- of his wages and he may voluntarily opt to contribute beyond the wage ceiling of Rs. 6500/- (i.e. upto his wages). During the course of membership, if the wages (Basic + Dearness Allowance including cash value of food concession and Retaining allowances) has crossed Rs. 6500/the member and employer are required to pay PF contribution at least upto Rs. 6500/- only.
18

(contd)
If an employee is willing he can also contribute to the fund in excess of the statutory limit of 10% or 12% of his wages, as the case may be. The employer need not pay in excess of the statutory limit. The employers share of PF contribution should not be deducted from the wage of a member or recovered from the member. Principal employer is liable for default by their contractors.
19

ASSESSMENT OF DUES / RECOVERY

In case of default, the dues can be assessed under Section 7A of the Act. Proceedings u/s. 7A is quasi-judicial process. In case of belated remittance damages u/s. 14B and interest u/s. 7Q are leviable.

20

CONSEQUENCES ON DEFAULT
In case of non-payment of assessed dues the recovery actions as per provisions u/s. 8 of the Act read with 2nd / 3rd Schedule of I.T. Act, 1961. Penal damages upto 25% per annum and interest at the rate of 12% payable on the defaulted amount. Attachment of bank accounts. Realisation of dues from Debtors.
21

(contd)
Attachment of movable and immovable properties. Arrest and detention. Action u/s. 406/409 of Indian Penal Code. Action u/s. 110 Criminal Procedure Code. Prosecution u/s. 14 of the EPF Act.

22

DUTIES OF THE EMPLOYERS

Enrol all categories of employees including the employees engaged by or through contractors and also piece rated, hourly rated employees. Remit the contributions and administrative charges before the 15th of the following month. File the initial returns of Form 9, Form 3(P.S.), form 5A. File the monthly returns in Form 12A, Form 5, Form 10 and Challans for remitting the dues.
23

(contd)
Maintain the contribution card in respect of each employee in Form 3A and submit the annual returns in Form 3A and 6A after reconciliation with Challans and form 12A. The employer has to ensure that statutory dues in respect of contractors employees are remitted and returns filed. Employer should attest the form No.2 and the claims forms submitted by the member/ legal heirs/ nominees.

Make available all relevant records for inspection of visiting officials with due authorisation.

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SERVICES TO MEMBERS

25

(i) Benefits under EPF Scheme

Payment of accumulation plus interest on retirement, resignation, death. Partial withdrawals permitted for specific purposes:
o Financing life insurance policies o acquiring house or site o Addition and substantial alterations of the dwelling house o marriage of self and dependents o education of children o treatment of illness etc. o Purchase of equipment by physically handicapped employees. o Financial assistance on dismissal, discharge, closure / lock out.
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OTHERS
(ii) Redressal of grievances at field office and Head Office levels. (iii) Disposal of grievances in Bhavishya Nidhi Adalats. (iv) Know Status of your Claim from EPFO Website. (v) Lodging the grievances on the Website under CPGRAM. (vi) Status of claims settlement from Information Kiosks.
27

DIFFICULTIES IN IMPLEMENTATION OF PROVISIONS OF THE ACT

No voluntary compliance by employers. Lack of awareness among establishments regarding compliance and submission of returns. Lack of awareness among the employees regarding social security benefits. Wage ceiling at Rs. 6500/-. Existence of Schedule Head. Non-issue of statement of members account due to non-submission of returns by the employer.
28

(contd)
(vii) Outsourcing and employees engaged on contract. (viii) Engaging the contract / part time employee in the Government Departments. (ix) Not fully computerization in EPFO. (x) Numerous returns submitted by the employers. (xi) Delay in settlement of claims / grievances due to heavy workload.
29

(contd)
(xii) Delay in issue of PF statements due to nonsubmission of returns. (xiii) Illiteracy among members for maintaining their Date of Birth records. (xiv) Employers reluctant to submit the claim forms in time.

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IMPORTANT SECTIONS OF THE ACT

SECTION 1 APPLICABILITY OF THE ACT SECTION 6 RATE OF CONTRIBUTIONS SECTION 7A DECIDING APPLICABILITY AND ASSESSMENT OF DUES SECTION 7Q IMPOSING OF INTEREST SECTION 8 RECOVERY OF DUES FROM EMPLOYERS AND CONTRACTORS

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(contd)
SECTION 11 PRIORITY OF PAYMENT OF EPF CONTRIBUTIONS OVER OTHER DEBTS SECTION 14 PENALTIES FOR DEFAULTERS SECTION 14B LEVYING OF DAMAGES ON BELATED PAYMENTS SECTION 16 EXCLUSION FROM THE ACT SECTION 17 EXEMPTION

32

THANK YOU.

33

EMPLOYEE PROVIDENT FUND ACT1952

BY BIPENDER GUPTA

CONTENTS
INTRODUCTION SCOPE & EXTENT APPLICABILITY / ELIGIBLITY INTERESTS INVESTMENT PATTERN FOR A PF TRUST WITHDRAWL OF PF SETTLEMENTS EXEMPTION OF TDS ON SETTLEMENT FORMS & RETURSN BENEFITS CONCLUSION

INTRODUCTION
Employee Provident Fund (EPF) is one of the main platforms of savings in India for nearly all people working in Government, Public or Private sector Organizations. It is implemented by the Employees Provident Fund Organization(EPFO) of India.
It is a mandatory, tax-qualified, defined, contribution retiral benefit plan wherein equal contribution at the specified rate is made by the employer and the employee and the same is payable in lump sum on retirement.

SCOPE & EXTENT

Employees Provident Funds Scheme, 1952 Employees Deposit-Linked Insurance Scheme, 1976 (EDLI) and Employees Pension Scheme, 1995 (EPS) (Earlier the Employees Family Pension Scheme, 1971)

WHO IS APPLICABLE FOR EMPLOYEE PROVIDENT FUND ?

The employee provident fund act 1952 implies to the whole of India except the state of Jammu & kashmir (section 2).This act implies (section 3) to: Every establishment which is a factory engaged in any industry specified in schedule I & in which 20 or more persons employed; Any establishment employing 20 or more persons of such establishments which central government may, by notification in the official gazette specify. NGOS Considering the operations of charitable institutions these includes the following: Educational, scientific research & training institute ; Establishment known as hospitals; Establishment rendering expert services; Establishments engaged in poultry farming Establishment engaged in cattle feed industry;

WHO IS ELIGIBLE FOR EMPLOYEE PROVIDENT FUND?

FOR NEW ENTRANTS An employee is eligible for membership from the day he joins the company who has enrolled for EPF Scheme If an Employer has equal to or more than 20 employees, it is mandatory for him or to join the Employee Provident Fund Scheme. If the employees emoluments exceed Rs. 6,500/- per month, he has the option to join the Scheme(s) with the consent of employer. Declare previous employment details, if any, in Form No. 11 to the employer. On becoming a member of the Schemes file details in Form No. 2 ( family particulars/ nominations) through the employer. Rate of contribution payable by a member shall be @ 12% of his emoluments. A member can contribute statutorily over and above the prescribed rate. FOR EXISTING ENTRANTS Enrolment: Any change in the family status, such as,
marriage of the member. additions / deletion in the family. Legal adoption of the children. Change of nominee, is to be filed in Form No. 2 through the employer.

In the event the member is holding a Scheme Certificate (under EPS, 95), he should surrender the same to the concerned EPFO office, through his employer. A member is entitled to various benefits & facilities such as withdrawals, advances, pensions, death insurance etc.

WHAT IS THE EPF INTEREST RATE?

The EPF interest rate of India is decided by the central government with the consultation of Central Board of trustees. In the past several decades, the interest rate has ranged from 8-12 % of the balances maintained in the fund. The EPF interest rate notification is available on the official website of EPF India on an annual basis. The same is communicated through majo dailies in all cities

HOW MUCH ONE CAN SAVE BY INVESTING IN EPF?

Lets say Swayam starts with a basic salary of Rs. 20,000. Every year, on an average, he gets a 5% increment. He started at 25 years and worked till 60 years so his working life is, 35 years. He contributes 12% of his basic salary towards PF which is matched equally by ones company, (EPF contribution is 3.67%, EPS 8.67%). In this case, over the course of 35 years of his working life, his total contribution is Rs. 26.01 Lakhs. Of course, his company makes a contribution of Rs. 7.955 Lakhs, total contribution of Rs 33.967 lakh. And this amount grows into Rs. 1.38 Crores at the time of his retirement.

HOW IS IT CALCULATED ?
At the beginning of each year there would be opening balance, the amount accumulated till then. Contribution is made monthly but interest is calculated yearly. On gets interest on opening balance and monthly contribution. So for next year the new opening balance would be: old opening balance + contribution throughout the year + interest on the (old opening balance + contribution)

HOW WOULD I KNOW THE AMOUNT OF ACCUMULATION IN MY PF ACCOUNT ?

PF office sends an annual statement through the employer which gives details about the PF accumulations. The statement contains details like, Opening balance, amount contributed during the year, withdrawal during the year, interest earned and the closing balance in the PF account. This statement is sent by the PF department on completion of the financial year.

CLARIFICATION ABOUT CONTRIBUTION

AFTER REVISION IN WAGE CELLING
FROM Rs.5000 to Rs.6500 w.e.f. 1-6-2001 PER MONTH THE GOVERNMENT CONTINUE TO CONTRIBUTE 1.16% UPTO THE ACTUAL WAGE OF MAXIMUM Rs.6500 PER MONTH TOWARDS EMPLOYEES PENSION SCHEME. THE EMPLOYERS SHARE IN THE PENSION SCHEME WILL BE Rs.541 w.e.f. 1-6-2001. UNDER EMPLOYEES DEPOSITLINKED INSURANCE SCHEME THE CONTRIBUTION @ 0.50% IS REQUIRED TO BE PAID UPTO A MAXIMUM LIMIT OF Rs.6500. THE EMPLOYER WILL PAY ADMINISTRATIVE CHARGE @ 0.01% ON MAXIMUM LIMIT OF Rs.6500. THE EMPLOYER ALSO WILL PAY ADMINISTRATIVE CHARGES @ 0.01% ON MAXIMUM LIMIT OF Rs.6500 WHEREAS AN EXEMPTED ESTABLISHMENT WILL PAY INSPECTION CHARGES @ 0.005% ON THE TOTAL WAGES PAID.

NOTES THE ABOVE CLARIFICATION IS GIVEN BY TAKING WAGES UPTO A MAXIMUM OF Rs.6500 TOWARDS WAGE (BASIC+DA). SINCE AN EXCLUDED EMPLOYEE i.e. DRAWING WAGES MORE THAN Rs.6500 CAN ALSO BECOME MEMBER OF THE FUND AND THE SCHEMES ON JOINT REQUEST AND IF, FOR INSTANCE, SUCH AN EMPLOYEE IS GETTING Rs.10,000 PER MONTH, HIS SHARE TOWARDS PROVINDENT FUNDCONTRIBUTION WILL BE Rs.1200 e.g. 12% AND EMPLOYERS SHARE TOWARDS PROVIDENT FUND CONTRIBUTION WILL BE Rs.659 AND Rs.541 TOWARDS EMPLOYEES PENSION FUND.

PAYMENT OF CONTRIBUTION
THE EMPLOYER SHALL PAY THE CONTRIBUTION PAYBLE TO THE EMPLOYEES PROVIDENT FUND, EMPLOYEES DEPOSITE LINKED INSURANCE, AND EMPLOYEES PENSION FUND IN RESPECT OF THE MEMBER OF THE EMPLOYEES PENSION FUND BY HIM DIRECTLY BY OR THROUGH A CONTRACTOR. IT SHALL BE THE RESPONSIBILITY OF THE PRINCIPAL EMPLOYER TO PAY THE CONTRIBUTIONS PAYBLE TO THE EPF, EDLI AND EPSBY HIM SELF IN RESPECT OF THE EMPLOYEES DIRECTLY EMPLOYED BY HIM AND ALSO IN RESPECT OF THE EMPLOYEES EMPLOYED BY OR THROUGH A CONTRACTOR.

A/c 1 EPF EMPLOYERS 12% + EMPLOYEES 3.67% = 15.67 % A/c 2 EPF ADMIN CHARGES 1.10% A/c 10 EPS EMPLOYEES 8.33 % A/c 21 EDLI 0.50 % A/c 22 EDLI ADMIN CHARGES 0.01% TOTAL = 25.61%

WITHDRAWL OF EMPLOYEE PROVIDENT FUND 1952

WITHDRAWL BEFORE RETIREMENT
You can withdraw up to 90% of the amount in you EPF account after you attain the age of 54 years, or within one year before actual retirement on superannuation whichever is later. Claim application in form 19 has to be submitted to the concerned Provident Fund Office. For other cases such as Shifting of Jobs At such times, the PF balance could be transferred from one employer to another. The existing balance would continue to stay. With fresh contributions made by the new employer. Quitting of Job PF could be withdrawn, if you quit your job and provide a declaration that you do not intend to work for the next six month.

WITHDRAWL AFTER RETIREMENT

You can withdraw full amount in the fund on retirement from service after 55 years of age. You can also withdraw the full amount due to any of the following occurrences:

1. If you have not attained the age of 55 year at the time of termination of service. 2. If you retired on account of permanent and total bodily or mental disablement 3. If you migrated from India for permanent settlement abroad or for taking employment abroad. 4. In the case of mass or individual retrenchment.

SETTLEMENT OF EMPLOYEE PROVIDENT FUND CLAIM

IMMEDIATE SETTLEMENT WITHOUT WAITING PERIOD OF TWO MONTH 69(1)(a)Retirement after attaining 58yrs of age. 69(1)(b)Retirement on a/c of total & permanent incapacity due to bodily or mental infirmity. 69(1)(d)Termination of service on retrenchment. 69(1)(dd) Termination on V.R.S SETTLEMENT ONLY AFTER A WAITNG PERIOD OF TWO MONTHS 69(1)(e)(i)Transfer of a non retrenched employee from a closed establishment to uncovered establishment. 69(1)(e)(ii)Transfer of an employee from a covered establishment to an un-covered establishment under the same employer. 69(2)Other cases viz. Resignation, Leaving Service, etc. NOTE: For female members leaving service for the purpose of getting married; waiting period not applicable.

69(1)(c) Migration from India for permanent settlement abroad or taking employment abroad.

69(1)(e)(iii)Members discharged & retrenchment compensation paid under I.D Act 1947.

EXEMPTIONS
Head Statutory PF Recognized PF UnRecognised PF Employers contribution to PF Deduction under sec 80C Interest credited on PF account Exempt from tax Available Exempt from tax Exempt up to 12% of salary (Basic +DA) Available Exempt up to 9.5% Exempt from tax: Exempt from tax Not available Exempt from tax Only employees share of contribution is exempt

Lump sum payment received at Exempt from tax the time of retirement or termination of service

a. If the employee has worked for at least 5 years with the employer b. If the service is terminated on account of ill-health or by contraction or discontinuance of the employers business or any other reason beyond control of employee c. If the employee transfers the balance in his PF to his new PF a/c maintained by his new employer

FORMS OF PF
Form No. 2 --Nomination form Form No. 11 Declaration of previous employer & PF and Pension amount Form No. 13 PF Transfer from previous employer

RETURNS IN EMPLOYEE PROVIDENT FUND

MONTHLY RETURNS 12 A (Employees Strength and paid) Form 5 - New Joining (Name, Fathers Name, DOJ, DOB, Gender. Form 10 Left Employees (Name, Fathers Name, DOJ, DOL, Reason. COMBINED CHALLAN A/C 1,2,10,21 & 22 Note : Above all contribution count on Employees Basic Earnings. Nomination : Form 2 (Revised) Nominee Change : Form 8 ANNUAL RETURNS 3 A : Employees individual detail month wise (Period 1st April to 31st March) 6 A : All Employees combined detail month wise

For Withdrawal : Form 19 (Green) & 10 c (White)

Loan : Form 31 after 7 Years

ADVANCES FROM PF ACCUMULATION ?

Purchase dwelling site Construction of a dwelling house Completing construction of the house Buy a dwelling house /Flat from Agency Purchasing a newly constructed/old dwelling house or flat from an individual Purchasing house/flat from a promoter

Additional Loan -alterations/improvements

Further housing withdrawal Repayment housing loan

NOMINATION
An employee may be allowed to make a nomination conferring on one or more persons the right to receive the provident fund amount If an employee nominates more than one person, he shall, in his nomination specify the amount or share payable to each of the nominees. Where an employee has a family at the time of making a nomination, the nomination shall be in favour of one or more persons belonging to his family Any nomination made by an employee in favour of a person not belonging to his family shall be invalid. If at the time of making a nomination the employee has no family, the nomination may be in favour of any person or persons A nomination made by an employee may, at any time, be modified by filing Form no. 2 g) Where the nomination is wholly or partly in favour of a minor, the Member may, appoint a major person of his Family to be the guardian of the minor nominee Provided that where there is no major person in the Family, the Member may, at his discretion, appoint any other person to be a guardian of the minor nominee. Family means: For Provident Fund (PF): in the case of a male member, his wife, his children, whether married or unmarried, his dependent parents and his deceased sons widow and children; In the case of a female member, her husband, her children, whether married or unmarried, her dependent parents, her husbands, dependent parents, her deceased sonss widow and children;

PENALTY IN EMPLOYEE PROVIDENT FUND ACT 1952

LESS THAN 2 MONTHS @17% p.a. 2 MONTHS & ABOVE BUT LESS THAN UPTO 4 MONTHS @ 22% p.a. 4 MONTHS & ABOVE BUT LESS THAN UPTO 6 MONTHS @ 27% p.a. 6 MONTHS & ABOVE @ 37 % p.a.

PENAL PROVISION FOR EMPLOYEE PROVIDENT FUND

LIABLE TO BE ARRESTED WITHOUT WARRANT BEING A COGNISABLE OFFENCE. DEFAULTS EMPLOYER IN PAYING CONTRIBUTIONS OR INSPECTIONADMINISTRATIVE CHARGES ATTRACT IMPRISONMENT UPTO 3 YEARS AND FINES UPTO Rs.10,000 (Sec.14). FOR ANY RETROSPECTIVE APPLICATION, ALL DUES HAVE TO BE PAID BY EMPLOYER WITH DAMAGES UPTO 100% OF ARREARS.

BENEFITS OF EMPLOYEE PROVIDENT FUND ?

EMPLOYEES COVERED ENJOY A BENEFIT OF SOCIAL SECURITY IN THE FORM OF AN ATTACHABLE AND UNWITHDRAWABLE (EXCEPT I SEVERLY RESTRICTED CIRCUMSTANCES LIKE BUYING HOUSE, MARRIAGE, EDUCATION etc.). FINANCIAL NEST EGG TO WHICH EMPLOYEES AND EMPLOYERS CONTRIBUTE EQUALLY THROUGHOUT THE COVERED PERSONS EMPLOYMENT. THIS SUM IS PAYBLE NORMALLY ON RETIREMENT OR DEATH. OTHER BENEFITS INCLUDE EMPLOYEES PENSION SCHEME AND EMPLOYEES DEPOSITE LINKED INSURANCE SCHEME.

CONCLUSIONS
Contribution made to EPF and PPF gets deduction under Section 80C and the interest earned is tax free. That is both works under EEE (Exempt, Exempt and Exempt) tax regime. However, PF is better than PPF in two aspects In the case of PF, the employer also contributes to the fund. There is no such contribution in case of PPF. The rate of interest on PF is also marginally higher (currently 8.50%) than interest on PPF (8%).

THE PAYMENT OF GRATUITY ACT,1972

THE GROUP

NAME HARSHWARDHAN SINGH RATHOOR BETTY MATHEW SHRADHA GARG VISHAL VATS PREMLATA TUTI DAKSH AGRAWAL NEHA MARWAH MANSI SHARMA RAVI ROSHAN DUNGDUNG ROLL NO. 58 01 02 03 04 05 07 08 09

INTRODUCTION
Gratuity means gifts or service often in return of favors and services. In the present context, it means, a sum of money paid to an employee at the end of employment. Gratuity in case of retirement, superannuation or death helps family to adjust in a new situation in which income ceases partially or completely. Gratuity Schemes, serves as an important tool of social security.

HISTORICAL BACKGROUND
Govt. Of Keralas Legislation for payment of Gratuity
3rd June,1971 introduced the ordinance, wherein a scheme for payment of gratuity was enacted

Ordinance replaced by West Bengal Employees payment of compulsory Gratuity Act,1971

Central Legislation on gratuity -DiscussedLabour Ministers Conference held at New Delhi 1971

Accordingly the Payment of Gratuity Bill was introduced in Parliament

HISTORICAL BACKGROUND
In the earlier days gratuity schemes were introduced in some establishments either voluntarily by employers or under agreements between employers and workers. However these schemes were very narrow in their scope and were applicable only to some establishments and therein few certain categories. A central act, namely, The Payment Of Gratuity Act, 1972, was enacted and came into force on the 16th September,1972.

Flow of The Payment of Gratuity Act,1972

EXTENT & APPLICATION DEFINITIONS CONTINOUS SERVICE CONTROLLING AUTHORITY PAYMENT OF GRATUITY COMPULSORY INSURANCE POWER TO EXEMPT NOMINATION

FLOW OF THE ACT

DETERMINATION OF THE AMOUNT OF GRATUITY INSPECTOR POWERS OF INSPECTORS RECOVERY OF GRATUITY PENALTIES EXEMPTION COGNIZANCE OF OFFENCES PROTECTION OF ACTION TAKEN IN GOOD FAITH PROTECTION OF GRATUITY ACT TO OVERRIDE OTHER ENACTMENTS POWER TO MAKE RULES

TO WHAT SHALL THE ACT APPLY TO

Every factory, mine, oilfield, plantation, port and railway company. Every Shop or establishment if it employs 10 or more person in preceding one year. Such other establishment in which 10 or more employees are employed or were employed on any day of preceding twelve months.

DEFINITIONS
APPROPRIATE GOVERNMENT APPROPRIATE GOVERNMENT

ESTABLISHMENT Belonging to Central Govt. Having Branches in more than 1 state Factory Major Port, mine, oilfield or railway company

OTHER CASE

In any Other Case State Government

Wider Meaning of Establishments

Establishment Establishments include; Educational Institute Schools Polytechnics Universities Temple

DEFINITIONS
Completed year of service Continuous Service Controlling Authority Factory

Related Cases
A college run by a societies registered under the societies registration act is an establishment. Gurudeo Ayurved Mahavidyalaya v. Madhav,(1994) (Bombay) A temple is an establishment. Administrator, Shri Jagganath Temple Puri V. Jagannath Padhi, 1992 , Orrisa.

DEFINITIONS
EMPLOYEE means any person who is employed for wages, whether the terms of such employment are expressed or implied in any kind of work, manual or otherwise, in or in connection with the work of the factory, mine, oilfields, plantation, port, railway companies, shop or other establishments to which this act applies. Exception Persons employed in state or central government

EMPLOYER
"employer" means, in relation to any establishment, factory, mine, oilfield, plantation, port, railway company or shop In case of state or central govt. a person or authority appointed by the Government for the supervision and control of employees, or where no person or authority has been so appointed, the head of the Ministry or the Department concerned, In case of any local authority, the person appointed by such authority for the supervision and control of employees or where no person has been so appointed, the chief executive office of the local authority,

 in any other case, the person, who, or the authority which, has the ultimate control over the affairs of the establishment, factory, mine, oilfield, plantation, port, railway company or shop, and where the said affairs are entrusted to any other person, whether called a manager, managing director or by any other name, such person;

DEFINITION OF FAMILY
In Case of Male Employee Himself His wife His children whether married or unmarried His dependant parents The dependant parents of his wife and the widow Children of his predeceased son, if any In case of Female Employee Herself Her husband Her children whether married or unmarried Her dependant parents The dependant parents of her husband & the widow Children of her predeceased son, if any

DEFINITIONS
Wages
means all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employment and which are paid or are payable to him in cash and includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance.

Definitions
Retirement

Superannuation
By Superannuation is meant the act of getting relived from service on attaining a specified age which is prefixed, say, 58 years of age. On the other hand, Retirement is also an act of relieving from service but not necessarily be due to attaining a prefixed age and shall include Voluntary Retirement or even Compulsory Retirement. Though superannuation is also retirement, the latter need not be superannuation.

What is meant by 'continuous service'?

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 absent in respect of which an order treating the absence as a 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 Act;

If the service is interrupted by causes other than those mentioned in the definition, the service will be deemed to be interrupted & it will not fall within the definition of continuous service {Dalmia Magnesite corporation.salem vs R.L.commr,Madras(1982)
Where an employee (not being an employee employed in a seasonal establishment) is not in continuous service within the meaning of clause (1), for any period of 1 year, he shall be deemed to be in continuous service under the employer -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 190 days, in the case of an employee employed below the ground in a mine or in an establishment who works for less than six days in a week; and 240 days in any other case; 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 95 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 120 days, in any other case;

The number of days for which an employee has actually worked under an employer shall include the days on which he has been laid-off under an agreement or as permitted by standing orders made under the Industrial Employment (Standing Orders) Act, 1946, or under the Industrial Disputes Act, 1947, or under any other law applicable to the establishment; he has been on leave with full wages, earned in the previous year; he has been absent due to temporary disablement caused by an accident arising out of and in the course of employment; in the case of a female, she has been on maternity leave; so that the total period of such maternity leave does not exceed twelve weeks.
Where an employee, employed in a seasonal establishment, is not in continuous service within the meaning of clause (1), 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 75% of the number of days on which the establishment was in operation during such period.

CONTROLLING AUTHORITY
The appropriate Government, may, by notification, appoint any officer to be a controlling authority, who shall be responsible for the administration of this act and different controlling authorities may be appointed for different areas.

Payment of Gratuity
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 : 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 .

Payment Of Gratuity
in the case of death of the employee, gratuity payable to him shall be paid toHis 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 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.

Payment of Gratuity
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.

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.

CALCULATING FORMULA
FIFTEEN DAYS WAGE= (MONTHLY RATE OF WAGES LAST DRAWN BY HIM / 26) * 15

Payment of Gratuity
Gratuity Amount payable under Payment of Gratuity Act enhanced from Rs.3.5 lakhs to Rs. 10 lakhs As Per Payment of Gratuity (Amendment) Act,2010 (No. 15 of 2010), dated 17-5-2010

Section 4 (4) now reads as

The amount of gratuity payable to an employee shall not exceed Ten Lakh Rupees

Payment Of Gratuity
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. 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.

Payment Of Gratuity
Notwithstanding anything contained in subsection (1), - (a) the gratuity of an employee, whose services have been terminated for any act, willful 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.

Payment of Gratuity
The gratuity payable to an employee may be wholly or partially forfeited
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 if the services of such employee have been terminated for any act which constitutes an offence involving moral turpitude, provided that such offence is committed by him in the course of his employment.

Compulsory Insurance
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, for his liability for payment towards the gratuity under this Act, from the LIC of India established under the Life Insurance Corporation of India Act, 1956 (31 of 1956) or any other prescribed insurer.

Compulsory Insurance
The appropriate Government may, subject to such conditions as may be prescribed, exempt every 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 from the provisions of sub-section (1).

Compulsory Insurance
For the purpose of effectively implementing the provisions of this section, every employer shall within such time as may be prescribed get his establishment registered with the controlling authority in the prescribed manner 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).

Compulsory Insurance
The appropriate Government may, by notification, make rules to give effect to the provisions of this section and such rules may provide for the composition of the Board of Trustees of the approved gratuity fund and for the recovery by the controlling authority of the amount of the gratuity payable to an employee from the Life Insurance Corporation of India or any other 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.

Compulsory Insurance
Where an employer fails to make any payment by way of premium to 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 Act (including interest, if any, for delayed payments) forthwith to the controlling authority.

Compulsory Insurance
Whoever contravenes the provisions of subsection (5) shall be punishable with fine which may extend to ten thousand rupees and in the case of a continuing offence with a further fine which may extend to one thousand rupees for each day during which the offence continues.

POWER TO EXEMPT
The Govt. may, by notification, and subject to such conditions as may be specified in the notification, exempt any establishment, factory, mine, oilfield, plantation, port, railway company or shop to which this Act applies from the operation of the provisions of this Act if, in the opinion of the appropriate Government, the employees in such establishment, factory, mine, oilfield, plantation, port, railway company or shop are in receipt of gratuity or pensionary benefits not less favourable than the benefits conferred under this Act.

POWER TO EXEMPT
The appropriate Government may, by notification and subject to such conditions as may be specified in the notification, exempt any employee or class of employees employed in any establishment, factory, mine, oilfield, plantation, port, railway company or shop to which this Act applies from the operation of the provisions of this Act, if, in the opinion of the appropriate Government, such employee or class of employees are in receipt of gratuity or pensionary benefits not less favourable than the benefits conferred under this Act.

POWER TO EXEMPT
A notification issued under sub-section (1) or sub-section (2) may be issued retrospectively a date not earlier than the date of commencement of this Act, but no such notification shall be issued so as to prejudicially affect the interests of any person.

Nomination
To be made after Completion of 1 year of service. At the time of nomination the amount of gratuity payable can be distributed if there are more than one nominee. If at time of making nomination, the employee has a family, the nomination shall be made in favour of one or more member of family. After giving notice to the employer the employee can make modification to nomination. If nominee predeceases employee, the interest of nominee shall revert to employee who shall make fresh nomination. Every nomination shall be kept by employer in his safe custody.

a n d w h e r e t w o o r m o r e I n s p e c t o r s a r e a p p o i n t

INSPECTORS
The appropriate Government may, by notification, appoint as many Inspectors, as it deems fit, for the purposes of this Act. The appropriate Government may, by general or special order, define the area to which the authority of an Inspector so appointed shall extend and where two or more Inspectors are appointed for the same area, also provide, by such order, for the distribution or allocation of work to be performed by them under this Act. Every Inspector shall be deemed to be a public servant within the meaning of section 21 of the IPC, 1860 (45 of 1860).

POWER OF INSPECTORS
Require an employer to furnish such information as he may consider necessary. Enter and inspect. Examine . Exercise such other powers as may be prescribed.

RECOVERY OF GRATUITY
If the amount of gratuity payable is not paid by the employer, within the prescribed time, to the person entitled thereto, the controlling authority shall, on an application made to it in this behalf by the aggrieved person, issue a certificate for that amount to the Collector, who shall recover the same, together with compound interest thereon at such rate as the Central Government may, by notification, specify, from the date of expiry of the prescribed time, as arrears of land revenue and pay the same to the person entitled thereto :Provided that the controlling authority shall, before issuing a certificate under this section, give the employer a reasonable opportunity of showing cause against the issue of such certificate :Provided further that the amount of interest payable under this section shall, in no case exceed the amount of gratuity payable under this Act.

r n t p e t r h s e o r n e w i n t h r e c s o p n e t c a t i n o e f d a i n y t a h n i y n g e n w a h c i t c m h e n i t s o i t n h e g r

PENALTIES
OFFENCE PENALTY

FALSE STATEMENT TO AVOID PAYMENT

6 Months Imprisonment or Fine Rs.10,000 or Both 3 Months 1 Year Imprisonment Fine Rs.10,000-20,000 Or Both

DEFAULT IN COMPLYING WITH THE ACT

NON-PAYMENT OF GRATUITY

6 Months-2 yrs. Imprisonment

EXEMPTION OF EMPLOYER FROM LIABILITY IN CERTAIN CASES

Where an employer is charged with an offence punishable under this Act, he shall be entitled, upon complaint duly made by him and on giving to the complainant not less than three clear days' notice in writing of his intention to do so, to have any other person whom he charges as the actual offender brought before the court at the time appointed for hearing the charge; and if, after the commission of the offence has been proved, the employer proves to the satisfaction of the court
(a) that he has used due diligence to enforce the execution of this Act, and

 (b) that the said other person committed the offence in question without his knowledge, consent or connivance, that other person shall be convicted of the offence and shall be liable to the like punishment as if he were the employer and the employer shall be discharged from any liability under this Act in respect of such offence :

 Provided that in seeking to prove as aforesaid, the employer may be examined on oath and his evidence and that of any witness whom he calls in his support shall be subject to crossexamination on behalf of the person he charges as the actual offender and by the prosecutor :

 Provided further that, if the person charged as the actual offender by the employer cannot be brought before the court at the time appointed for hearing the charge, the court shall adjourn the hearing from time to time for a period not exceeding three months and if by the end of the said period the person charged as the actual offender cannot still be brought before the court, the court shall proceed to hear the charge against the employer and shall, if the offence be proved, convict the employer.

COGNIZANCE OF OFFENCE
No court shall take cognizance of any offence punishable under this Act save on a complaint made by or under the authority of the appropriate Government : Provided that where the amount of gratuity has not been paid, or recovered, within six months from the expiry of the prescribed time, the appropriate Government shall authorise the controlling authority to make a complaint against the employer, whereupon the controlling authority shall, within fifteen days from the date of such authorisation, make such complaint to a Magistrate having jurisdiction to try the offence.(2) No court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any offence punishable under this Act.

PROTECTION OF ACTION TAKEN IN GOOD FAITH

No suit or other legal proceeding shall lie against the controlling authority or any other person in respect of anything which is in good faith done or intended to be done under this Act or any rule or order made thereunder.

PROTECTION OF GRATUITY
No gratuity payable under this Act and no gratuity payable to an employee employed in any establishment, factory, mine, oilfield, plantation, port, railway company or shop exempted under section 5 shall be liable to attachment in execution of any decree or order of any civil, revenue or criminal court.

ACT TO OVERRIDE OTHER ENACTMENTS ETC.

The provisions of this Act or any rule made there under shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than this Act or in any instrument or contract having effect by virtue of any enactment other than this Act.

POWER TO MAKE RULES

(1) The appropriate Government may, by notification make rules for the purpose of carrying out the provisions of this Act. (2) Every rule made by the Central Government under this Act shall be laid, as soon as may be after it is made, before each House of Parliament while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or both Houses agree that the rule should not be made, the rule shall, thereafter, have effect only in such modified form or be of no effect as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.

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