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Statement of Objects and Reasons. - There is at present no Central Act to regulate the payment of gratuity to industrial workers, except the Working Journalists (Conditions of Service) and Miscellaneous Provisions Act, 1955. The Government of Kerala enacted legislation last year for payment of gratuity to workers employed in factories, plantations, shops and establishments. The West Bengal Governor promulgated an Ordinance on the 3rd June, 1971 prescribing a similar scheme of gratuity. This Ordinance has since been replaced by the West Bengal Employees' Payment of Compulsory Gratuity Act, 1971, enacted by the President on 28th August 1971. Gratuity is also being paid by some employers to their workers under awards and agreements.

2. Since the enactment of the Kerala and the West Bengal Acts, some other State Governments have also voiced their intention of enacting similar measures in their respective States. It has become necessary, therefore, to have a Central law on the subject so as to ensure a uniform pattern of payment of gratuity to the employees throughout the country. The enactment of a Central law would also avoid different treatment to the employees of establishments having branches in more than one State when, under the conditions of their service, the employees are liable to transfer from one State to another.

3. The proposal for Central legislation on gratuity was discussed in the Labour Ministers' Conference held at New Delhi on the 24th and 25th August, 1971 and also in the Indian Labour Conference at its Session held on the 22nd and 23rd October, 1971. There was general agreement at the Labour Ministers' Conference and the Indian Labour Conference that Central legislation on payment of gratuity might be undertaken as early as possible. It is, accordingly, proposed to undertake such legislation.

4. In enacting the President's Act for West Bengal in August, 1971, care has been taken to so design its provisions that they could serve as far as possible as norms for the Central law. The Bill has, therefore, been drafted on the lines of the West Bengal Employees' Payment of Compulsory Gratuity Act, 1971 with some modifications which have been made in the light of the views expressed at the Indian Labour Conference relating to forfeiture of gratuity in cases of dismissal for gross misconduct.

5. The Bill provides for gratuity to employees drawing wages up to Rs. 270 per month in factories, plantations, shops, establishments and mines, in the event of superannuation, retirement, resignation and death or total disablement due to accident or disease. The quantum of gratuity payable will be 15 days' wages based on the rate of wages last drawn by the employees concerned for every completed year of service or part thereof in excess of six months subject to a maximum of 15 months' wages. The term "wages " will mean "basic wage plus dearness allowance ".

6. It is proposed that the appropriate Government for administering the Act in relation to establishment belonging to or under the control of the Central Government, or a railway company, or mine, a major port and oilfield or in relation to establishments having departments or branches in more than one State, will be the Central Government, and, in relation, to other establishments, the State Government.

Amendment Act 25 of 1984-Statement of Objects and Reasons.-(1) The Payment of Gratuity Act, 1972 provides for payment of gratuity to the employees employed in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments and for matters connected therewith or incidental thereto.

(2) The Supreme Court had in its judgment in the case of Lalappa Lingappa v. Lakshmi Vishnu Textile Mills, Sholapur (1981) 2 S.C.C. 238, held that in terms of the existing definition of "continuous service " in section 2(c) of the Act, the permanent employees were not entitled to payment of gratuity for the years they remained absent without leave and had actually worked for less than 240 days in a year. It has been represented that the enforcement of this ruling has resulted in denial of gratuity to a number of employees, whose short term absence had remained unregularised due to lack of appreciation of its significance for the purpose of working out their entitlement to gratuity. It is, therefore, now proposed to amend the definition of "continuous service " suitably and to specifically provide that a period of absence in respect of which no punishment or penalty has been imposed would not operate to interrupt the continuity of service for the purpose of payment of gratuity. It is also proposed to amplify the definition of "continuous service " to provide,-

(a) that an employee working in an establishment which works for less than six days in a week and who is not in uninterrupted service for one year, shall be deemed to be in continuous service for a period of one year if he has actually worked for 190 days in the preceding year, and

(b) that for determining the continuous period of six months for the purpose of payment of gratuity, an employee should have completed half the number of days of actual work which constitute "continuous service " for a whole year.

(3) Opportunity is also being taken to provide that a shop or establishment once covered shall continue to be covered under the Act notwithstanding that the number of persons employed therein at any time falls below 10. This is intended to check the tendency among the employers to artificially reduce the number of employees so as to get out of the coverage under the Act. It is also proposed to provide for grant of exemption from the operation of the Act to any person or class of persons if they are in receipt of gratuity or pensionary benefits not less favourable than the benefits conferred under the Act.

Amendment Act 22 of 1987-Statement of Objects and Reasons.-The Payment of Gratuity Act, 1972 provides for payment of gratuity to persons employed in factories, mines, oilfields, plantations, ports, railway companies, shops and certain other establishments employing ten or more persons and for matters connected therewith or incidental thereto. The Labour Ministers' Conference held in 1980 and 1982 had recommended inter alia that the time limit for payment of gratuity might be prescribed in the Act itself and that there should be a suitable provision for recovery of interest in cases where the payment of gratuity is delayed. The Indian Labour Conference held in November, 1985 had recommended that a provision for compulsory insurance of employers' liability and setting up of Gratuity Fund for payment of gratuity be incorporated in the Act. The Trade Unions have been representing for suitable enhancement in the wage limit for coverage and ceiling for payment of gratuity.

2. Based on the above recommendations and representations, it is proposed to carry out certain amendments in the Act. Some of the more important amendments are:-

(i) The coverage of the Act is being extended to persons drawing wages up to Rs. 2,500 per month and an enabling provision is being made for raising the wage limit for coverage from time to time;

(ii) Provision is being made for depositing the amount of gratuity payable to a minor with the controlling authority who shall invest the money in a bank or a financial institution for the benefit of minor;

(iii) The existing ceiling of 20 months' wages for payment of gratuity is being replaced by a monetary ceiling of Rs. 50,000;

(iv) Provision is being made for compulsory insurance of employer's liability to pay gratuity under the Act or in the alternative for the setting up of a Gratuity Fund under the provisions of the Act in relation to establishments employing five hundred or more employees;

(v) Provision is also being made for payment of simple interest at a specified rate, if the amount of gratuity is not paid within thirty days from the date it becomes payable;

(vi) Penalties prescribed under the Act are being made more stringent.

The other amendments proposed in the Bill are of a minor or consequential nature.

Amendment Act 34 of 1994 - Statement of Objects and Reasons.-The Payment of Gratuity Act, 1972 provides for a scheme for payment of gratuity to the employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments and for matters connected therewith or incidental thereto. Under clause (e) of section 2 of the Act, the term "employee " means any person employed on wages not exceeding two thousand and five hundred rupees per mensem or such higher amount as the Central Government may having regard to the general level of wages, by notification, specify. In exercise of the powers conferred by clause (e) of section 2, the Central Government vide its notification dated the 26th November, 1992 specified with effect from the 1st day of December, 1992 three thousand and five hundred rupees per mensem as the higher amount of wage for definition of "employee " under the Act. There has been a demand for removal of the ceiling of wages for coverage of the Act, thus, making all the employees eligible for gratuity irrespective of their wages. The Labour Ministers' Conference held in 1983 has also recommended for the removal of the wage limit for payment of gratuity.

2. Sub-section (3) of section 4 of the Act provides that the amount of gratuity payable to an employee shall not exceed fifty thousand rupees. This amount was fixed in 1987. There have been representations from trade unions to remove or enhance the ceiling on the maximum amount of gratuity.

3. Based on the above-mentioned recommendations and representations, it is now proposed to carry out the following amendments in the Act:-

(i) The provisions of the Act are being extended to all the persons employed on wages in the establishments, etc., covered under the Act by removing the wage ceiling under clause (e) of section 2 of the Act;

(ii) The existing ceiling of fifty thousand rupees on the amount of gratuity payable under sub-section (3) of section 4 is being raised to one lakh rupees.

4. The other amendments proposed in the Bill are of a minor or consequential nature.

Amendment Act 15 of 2010 - Statement of Object and Reasons.The Payment of Gratuity Act, 1972 provides for payment of gratuity to the employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments and for matters connected therewith or incidental thereto.

2. Sub-section (3) of section 4 of the Act provides that the amount of gratuity payable to an employee shall not exceed three lakh and fifty thousand rupees. This amount was fixed with effect from the 24th September, 1997 by amendment to the Payment of Gratuity Act, 1972. There have been representations from trade unions and individuals to remove or enhance the ceiling on the maximum amount of gratuity payable under the Act.

3. Based on the representations and wide consultation with all stakeholders, it is now proposed to enhance the ceiling of three lakh and fifty thousand rupees on the maximum amount of gratuity payable under sub-section (3) of section 4 of the Act to ten lakh rupees.

4. The Bill seeks to achieve the above objectives.

[21st August, 1972]

An Act to provide for a scheme for the payment of gratuity to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments and for matters connected therewith or incidental thereto.

Be it enacted by Parliament in the Twenty-third Year of the Republic of India as follows:-