Academic journal article Indian Journal of Industrial Relations

Employment Relations & Managerialist Undercurrents-The Case of Payment of Gratuity Act, 1972

Academic journal article Indian Journal of Industrial Relations

Employment Relations & Managerialist Undercurrents-The Case of Payment of Gratuity Act, 1972

Article excerpt

The Payment of Gratuity Act, 1972 is an important legislation governing retirement benefits received by workers, and acquires particular significance in the absence of pension and lack of access to adequate social security for a large number of workers. We discuss here case laws pertaining to the Act in the last decade in the light of increasing the upper limit of gratuity payable to Rs: 10 lakhs. Case law pertaining to this important social security benefit suggests three broad areas of concern: inclusion-exclusion dynamics related to access to gratuity rights, the linkage of the denial or grant of payment of gratuity to reward for compliance and punishment for dissent, assertions of managerial prerogatives over the rights of workers in the pursuit of unilateralist dominance over employment relations.

Introduction

The Payment of Gratuity Act, 1972 is an important legislation governing the retirement benefits received by workers. There has been a progressive and rapid withdrawal of the state as a bastion of employee welfare in the post liberalization phase as the state pursues the reform agenda in the wake of the relentless march of neoliberal ideologies, policies and practices.

It is evident from annual labour statistics that employment relations disputes pertaining to gratuity are on the increase. Considering 2009-10 alone, 3744 cases were filed with the appropriate controlling authority (Ministry of Labour & Employment 2011: 31). Including cases carried forward from the previous year, a total of 5174 cases were disposed off, and an amount of Rs. 28,87,70,325 was disbursed (ibid.). 1307 cases were filed with the appellate authority in 2009-10 and including cases carried forward from the previous year, 1352 cases were settled, and an amount of Rs. 1,90,57,612 was awarded to workers (ibid.). The magnitude of the awards given through third party intervention indicates that violations of the Act by employers are on the rise.

The Payment of Gratuity Act, 1972 is a Central legislation which was enacted to regulate the payment of gratuity across the country for workers employed in factories, mines, oilfields, plantations, ports, railway companies, shops and establishments. It is however not applicable to employees of the Central and state governments who are governed by a different set of rules of gratuity. Earlier the Act was not applicable to employees who received more than Rs. 3500 as wages, but through an amendment in 1994 [Payment of Gratuity (Amendment) Act 1994] with effect from May 24, 1994, the Central Government removed this ceiling and made it applicable for all workers, including those in management and administrative cadres. According to the Act, a worker becomes eligible for gratuity if she has worked for five continuous years with an employer, and gratuity must be paid to her during separation arising from superannuation, retirement, resignation, death or disablement. The requirement of five continuous years of service does not apply in the case of death or disablement of a worker.

Gratuity is paid at the rate of fifteen days wages for every year of service rendered by an employee, with the maximum ceiling on gratuity being ten lakh rupees, as per the amendment introduced in 2010 [Payment of Gratuity (Amendment) Act 2010], and effective from May 24, 2010. Prior to this amendment, the maximum ceiling on the gratuity amount was three lakh fifty thousand rupees as per the amendment introduced in 1998 [Payment of Gratuity (Amendment) Act 1998] and effective from September 24, 1997. For the calculation of fifteen days wages for monthly wage employees, the monthly wage is divided by twenty six and then multiplied by fifteen. In the case of piece rated workers, the average daily wages for the past three months of employment are calculated and then multiplied by fifteen. Employees in seasonal establishments are paid gratuity at the rate of seven days wages per season. …

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