Social Security Legislation :

An Overview
UNIT 23 SOCIAL SECURITY
LEGISLATION : AN OVERVIEW
Objectives :
The objectives of this unit are to:
• give a brief account of the historical evolution of social security laws in India.
• examine in brief the problems associated with the administration of social
security schemes.
Structure
23.1 Introduction
23.2 Problems and Prospects

23.1 INTRODUCTION
Historically, the development of social security systems in their modern form is
traced from the enactment in 1883 of the first social insurance law in Germany under
Bismarck. The modern concept of social security is the offshoot of industrialisation.
In the industrialised countries, social security was first introduced hi the form of
social insurance. Its application was limited to certain occupational groups and it was
financed by contributions from the employers and the workers. In course of time it
was generalised; its coverage was extended to all cot more occupational groups, and
the State assumed the liability for financing the schemes wholly or partly. It has since
been further expanded in term of the numbers covered and the benefits provided and
has taken the form of social protection.

In our country social security programmes have been in existence since times
immemorial. Joint families, panchayats,(guilds), religious and charitable institutions
have continued to provide assistance to the needy for various common risks,
misfortunes and calamities. Kautilya's Arthashatra and Manusmriti bear testimony to
the fact that the social structure in those days was so evolved and codes so designed
as to provide security to all people. The joint Hindu family was the original cell of
security and first line of defence which could cope only with limited misfortunes. In
cases of longer calamities, appeal was made to the neighbours or the guilds.
Reference to such guilds was found in Rigveda, Upanishads' and in Other ancient
Indian literature. Their main purpose was collective security of life and property,
freedom from want and misery, and security against common risks., But organised
social security measures in statutory form are only of recent origin. Our Constitution
guarantees social security in the following words:'

The State shall, in particular, direct its policy towards securing:

a) “Right to an adequate means of livelihood.” [Article 39(a)]
b) “The State shall within the limits of its economic capacity and development,
make effective provision for securing public assistance In case of
unemployment, did-age, sickness, disablement and other cases of undeserved
want.” (Artlcle41)
c) “The State shall endeavour to secure to all workers agricultural, industrial or
otherwise, work, a living wage, conditions of work ensuring a decent standard of
life “……(Article 43)
Social security legislation in India in the industrial field consists of the following
enactments: (1) the Workmen's Compensation Act, 1923; (2) the Employees' State
Insurance Act, 1948; (3) the Employees' Provident Funds and Miscellaneous
Provisions Act, .1952; (4) the Maternity Benefit Act, 1961; and (5) the Payment of 5
Gratuity Act, 1970.
Laws for Labour Welfare
and Social Security The Workmen's Compensation Act is being administered exclusively by the State
Governments/Union Territory administrations. The Employees' Provident Funds and
Miscellaneous Provisions Act is administered by the Government of India through
the Employees' Provident Fund Organisation.-In the administration of the Employees'
State Insurance Act, the Central Government and State Governments share the
responsibility. Cash benefits under the ESI Act are administered by the Central
Government through the Employees' State Insurance Corporation (ESIC), whereas
medical care under-the ESI Act is being administered by the State Governments and
Union Territory Administrations. The Payment of Gratuity Act is being administered
by the Central Government in establishments under its control, and also
establishments having branches in more than one state, major ports, mines, oil fields
and the railways; and by the respective State Governments and Union Territory
Administrations in all other cases. In mines and circus industry, the provisions of the
Maternity Benefit Act are being administered by the Central Government through the
Chief Labour Commissioner (Central) and by the State Governments in factories,
plantations and other establishments.
In our country, the institutionalised form of social security began with the Workmen's
Compensation Act which "provides for the payment by certain classes of employers
to their workmen of compensation for injury by accident." As in the industrialised
countries the protection under the Act was limited to certain occupational groups and
the contingency covered was also limited to occupational injuries and diseases. The
Act was based on the principle of employer's liability. Social insurance came later
with the enactment of the Employees' State Insurance Act.
The International Labour Organisation was founded in 1919 and India was a founder
member of the ILO. One of the major functions of the ILO is to set standards for
protection of workers against exploitation. Social security is-one of the subjects on
which ILO has adopted a number of Conventions and Recommendations. Workmen's
compensation, maternity benefit, sickness. insurance and unemployment insurance
were some of the matters in which the ILO adopted Conventions or
Recommendations in the very first few years after its formation.
The Government of India examined the question of enacting a law for payment of
compensation to workers on the pattern of the Workmen's Compensation Act of
Great Britain. The matter was. referred to the local Governments and a committee
was set up to consider the matter. Eventually, the Workmen's Compensation Act was
passed in 1923 and it came into force in 1924.
The enactment of this law is of great significance from the point of view of social
security because it established the principle that compensation was payable to the
workers not as a penalty for an omission or commission on the part of the employer
which resulted in the accident or disease but as an insurance benefit. It created a new
type of liability to pay compensation at% fixed rate to an employee who is
incapacitated or to his dependent in the event of his death by accident arising out of
and in the course of employment. This liability is independent of any neglect or
wrongful act on the part of his master or his servants. In other words, it is not a
liability which arises out of tort. It is a liability arising out of the very relationship of
master and servant: .
Maternity benefit was the second contingency to receive attention. Some of the
provincial legislatures enacted a legislation providing for payment of a cash benefit to
women workers for a period ranging from 7 to 12 weeks of their absence from work as
a measure of maternity protection. The Presidency of Bombay was the first to pass the
Maternity Benefit Act in 1929. It was followed by Central Provinces, Sind, Ajmer-
Merwara, Madras, Delhi, U.P., Bengal, Punjab, Assam and Bihar. The last state to
enact maternity benefit law was Orissa in 1953. In the meantime the Government of
India also enacted a separate maternity benefit legislation for mine workers. The Royal
Commission on Labour in its report submitted in 1931 suggested a central legislation to
replace the provincial laws. The central law was enacted in 1961.
The Royal Commission on Labour also examined the question of introducing a scheme
of health insurance for workers. It recognised several difficulties in its Implementation
and yet it drew up a broad outline of a tentative scheme and suggested its introduction
6 on an experimental basis. Subsequently, the Government appointed
 The Workmen’s
Compensation Act, 1923
UNIT 24 THE WORKMEN’S
COMPENSATION ACT, 1923
Objectives

The Objectives of this unit are to:

• discuss the salient features of the Act

• present selected case law on the subject
Structure

24.1 Genesis of the Act

24.2 Object of the Act
24.3 Scope and Coverage
24.4 Definitions
24.5 Distribution of Compensation
24.6 Authority
24.7 Contracting Out
24.8 Claims and Appeals
24.9 Administration
24.10 Schedule IV
24.11 Case Law
24.12 Self-Assessment Questions
24.13 Answers to Check Your Progress
24.14 Further Readings

24.1 GENESIS OF THE ACT

A beginning of social security in India was made with the passing of the Workmen's
Compensation Act in 1923. Prior to 1923, it was almost impossible for an injured
workman to recover damages or compensation for any injury sustained by him in the
'ordinary course of his employment. Of course, there were rare occasions when the
employer was liable under the common law for his own personal negligence. The
dependants of a deceased workman could, in rare cases, claim damages under the
Fatal Accidents Act, 1855; if the accident was due to a wrongful act, neglect or fault
of the person who caused the death. In 1921, the government formulated some pro-
posals for the grant of compensation and circulated them for opinion. The proposals
received general support. As a result, the Workmen's Compensation Act was passed
in March 1923 and was put into force on July 1, 1924. Subsequently, there were a
number of amendments to the Act. The Act contains 36 sections and four Schedules.

24.2 OBJECT 0F THE ACT

The object of the Act is to impose an obligation upon employers to pay compensation
to workers for accidents arising out of and in the course of employment. The scheme
of the Act is not to compensate the workman in lieu of wages, but to pay
9
compensation for the injury sustained to him.
Laws for Labour Welfare
and Social Security 24.3 SCOPE AND COVERAGE
The Act extends to the whole of India and applies to any person-who is employed,
otherwise than in a clerical capacity, in the railways, factories, mines, plantations,
mechanically propelled vehicles, loading and unloading work on a ship, construction,
maintenance and repairs of roads, bridges, etc., electricity generation, cinemas,
catching or training of wild elephants, circus, and other hazardous occupations and
employments specified in Schedule II to the Act. Under sub'-section (3) of section 2
of the Act, the state governments are empowered to extend the scope of the Act to
any class of persons whose occupations are considered hazardous after giving three
months notice in the Official Gazette. The Act, however, does not apply to members
serving in the Armed Forces of the Indian Union, and employees covered under the
provisions of the Employees' State Insurance Act, 1948 as disablement and
dependants' benefit are available under this Act.

24.4 DEFINITIONS
Workman
In order to be a "workman" within the meaning of section 2(1)(n) of the Workmen's
Compensation Act, a person should first be employed; second, his employment
should not be of a casual nature; third, he should be employed for the purposes of the
employer's trade or business; and, lastly, the capacity in which he works should be
one set out in the list in Schedule II of the Act. This definition has been amended
very recently.
Dependants
For the purposes of the Act dependants have been grouped into two classes :
i) Those who are considered dependants without any proof; and
ii) Those who must prove that they are dependants.
The first group includes a widow, a minor legitimate son, an unmarried legitimate
daughter or a widowed mother. The following are included in the second group if
they were wholly or partially dependant on the earnings of the workers at the time of
his or her death; a widower, a parent other than a widowed mother, a minor
illegitimate son, an unmarried illegitimate daughter or a daughter legitimate or
illegitimate if married and minor, or if widowed, and a married brother or unmarried
sister or widowed sister, if a minor, a widowed daughter-in-law, a minor child of a
predeceased son, A minor child of a predeceased daughter where no parent of the
child is alive, or a paternal grandparent, if no parent of the workman is alive.

24.5 DISTRIBUTION OF COMPENSATION

The compensation shall be paid by the employer to a workman for any personal
injury sustained by him in an accident arising out of and in the course of his
employment. In Schedule I to the Act, the percentage loss of earning capacity or
disablement caused by different types of injuries has been listed. However, the
employer will not be liable to pay compensation for any kind of disablement (except
death) which\does not continue for more than three days, if the injury is caused when
the workman was under the influence of drink or drugs or wilfully disobeyed a clear
order or violated a rule expressly framed for the purpose of securing his safety or
wilfully removed or disregarded a safety device. A workman is-also not entitled to
compensation if he does not present himself for medical examination when required,
or if he fails to take proper medical treatment which aggravates the injury or disease.
In case it is not fatal, an employment injury may' cause any injury resulting in
permanent total disablement, permanent partial disablement, or temporary
disablement (Section 3).
The rate of compensation in case of death is an amount equal to 50 per cent of the
10 monthly wages of the deceased workman multiplied by the relevant factor or an
 The Workmen’s
amount of As. 50,000, whichever is higher. Where permanent total disablement Compensation Act, 1923
results from the injury, the compensation will be an amount equal to f0 per cent of
the monthly wages of the injured workman multiplied by the relevant factor, or an
amount of Rs. 60,000 whichever is higher. Where the monthly wages of a workman
exceed two thousand rupees, his monthly wages for the above purposes will be
deemed to be two thousand rupees only.
Where permanent partial disablement results from the injury, if specified in Part II of
Schedule; I, such percentage of the compensation which would have been payable in
the case of permanent total disablement as is specified therein as being the percentage
of the loss of earning capacity caused by that injury. The percentage loss of earning
capacity depends on the loss of limbs and varies from 1 per cent to 90 per cent. In the
case of an injury not specified in Schedule I, such percentage of the compensation is
payable in the case of permanent total disablement as is proportionate to the loss of
earning capacity (as assessed by the qualified medical practitioner) permanently
caused by the injury. Where more injuries than one are caused by the same accident,
the amount of compensation payable under this head shall be aggregated but shall not
in any case exceed the amount which would have been payable if permanent total
disablement had resulted from the injuries.
In case of temporary disablement, a half-monthly payment of the sum equivalent to
25 per cent of monthly wages of the workman has to be paid. Half-monthly payment
as compensation will be payable on the 16th day from the date of disablement. In
cases where the disablement is for 28 days or more, compensation is payable from
the date of disablement. In other cases, it is payable after the expiry of a waiting
period of 3 days. Thereafter, the compensation will be payable half-monthly during
the period of disablement or during a period of 5 years, whichever is shorter. There is
also a provision for commutation of half-monthly payments to a lump sum amount by
agreement between the parties or by an application by either party to the Commis-
sioner for Workmen's Compensation if the payments continue for not less than six
months (Section 4 and 7).
If the workman contracts any occupational disease peculiar to that employment, that
would be deemed to be an injury by accident arising out of and in-the course of his
employment for purposes of this Act. In the case of occupational diseases, the com-
pensation will be payable only if the workman has been in the service of the
employer for more than six months. Some of the occupational diseases listed in
Schedule III to the Act are anthrax, poisoning by lead, phosphorous or mercury, -
telegraphist’s cramp, silicosis, asbestosis, and bagassosis (Section 3).

24.6 AUTHORITY
It is provided that all cases of fatal accidents should be brought to the notice of the
Commissioner for Workmen's Compensation; and if the employer admits the
liability, the amount of compensation payable should be deposited with him. Where
the employer disclaims his liability for compensation to the extent claimed, he has to
make provisional payment based on the extent of liability which he accepts; and such
payment must be deposited with the Commissioner or paid to the workman. In such
cases, the Commissioner may, after such enquiry as he thinks fit, inform the depend-
ants that it is open to them to prefer a claim and may give such other information as
he thinks fit. Advances by the employers against compensation are permitted only to
the extent of an amount equal to 3 months' wages. He is also empowered to deduct an
amount not exceeding Rs. 50 from the amount of compensation iii order to indemnify
the person who incurred funeral expenses. The employer is required to file annual,
returns giving details of the compensation in order to indemnify tie person who
incurred funeral expenses. The employer is required to file annual returns giving
details of the compensation paid, the number of injuries and other particulars (See'
Lions 4A, 8 and 16).
The amount deposited with the Commissioner for Workmen's Compensation is
payable to the dependants of -the workman. The amount of compensation is to be
apportioned among the dependants of the deceased workman or any of them in such 11
proportion as the Commissioner thinks fit (Sections 2 and 8).
Laws for Labour Welfare
and Social Security If an employer is in default, in paying the compensation within one month from the
date it fell due, the Commissioner may direct the recovery of not only the amount of
the arrears but also a simple interest at the rate of six per cent per annum on the
amount due. If, in the opinion of the Commissioner, there is no justification for the
delay, an additional sum, not exceeding 50 per cent of such amount, may be
recovered from the employer by way of penalty (Section 4-A).

24.7 CONTRACTING OUT

A contract or agreement, whereby the workman relinquishes his right to
compensation from the employer for the personal injury arising out of and in the
course of employment, is null and void to the extent to which such contract or
agreement purports to remove or reduces, the liability for, the payment of
compensation. The compensation payable to the workman or to his dependants
cannot be assigned, attached or charged (Section 9 and 17).

24.8 CLAIMS AND APPEALS

In case the compensation is not paid by the employer, the workman concerned or his
dependants may claim the same by filing an application before the Commissioner for
Workmen's Compensation. The claim shall be filed within a period of two years of
the occurrence of the accident or death. The application which is filed after the period
of limitation can be entertained if sufficient cause exists. An appeal will lie to the
High Court against certain orders of the Commissioner if a substantial question of
law is involved. An appeal by an employer against an award of compensation is
incompetent unless the memorandum of appeal is accompanied by a certificate that
the employer has deposited the amount of such compensation. Unless such a
certificate accompanies the memorandum of appeal, the appeal cannot be regarded as
having been validly instituted. The period of limitation for an appeal under Section
30 is sixty days (Sections 10 and 30).

24.9 ADMINISTRATION
The Act is administered by state governments which are required to appoint
Commissioners for Workmen's Compensation. The functions of the Commissioner
include:

i) Settlement of disputed claims;

ii) Disposal of cases of injuries involving death; and

iii) Revision of periodical payments (Section 20).

The Commissioner may recover as an arrear of land revenue any amount payable by
any person under this Act, whether under an agreement for the payment of
compensation or otherwise (Section 31):

The Act made provision for the framing of the rules by the State and Central
Government and also their publication (Section 32-36).

12
Laws for Labour Welfare
and Social Security
UNIT 25 THE EMPLOYEES' STATE
INSURANCE ACT, 1948
Objectives

The Objectives of this unit are to:

• discuss the salient features of the Act

• present selected case law on the subject

Structure
25.1 Genesis of the Act
25.2 Applicability of the Act
25.3 Definitions
25.4 Contributions
25.5 Registration
25.6 Administration
25.7 Benefits
25.8 Restrictions
25.9 Protection
25.10 Penalties and Damages
25.11 Miscellaneous
25.12 Case Law
25.13 Self-Assessment Questions
25.14 Answers to Check Your Progress
25.15 Further Readings

25.1 GENESIS OF THE ACT

The Employees' State Insurance Act, 1948, is a pioneering measure in the field of
social insurance in our country. The subject of health insurance for industrial workers
was first discussed in 1927 by the Indian Legislature, when the applicability of the
Conventions adopted by the International Labour Conference was considered by the
Government of India. The Royal Commission on Labour, in its report (1931),
stressed the need for health insurance for workers in India. One of the earlier
decisions of the Labour Ministers' Conferences between 1940 and 1942 was to invite
an expert to frame a scheme of health insurance for workers. In pursuance thereof,
the responsibility for preparing a detailed scheme of health insurance for industrial
workers was entrusted in March 1943 to Prof. B.P. Adarkar who submitted his report
in December 1944. This was considered by the Government of India and State
governments as well as other interested parties. The Adarkar Plan and various other
suggestions emerged finally in the form of Workmen's State Insurance Bill 1946,
which was then referred to a Select Committee in November 12, 1947: The Select
Committee.extended the cover-age to all the employees in factories, and changed its
name from Workmen's State Insurance Bill to Employees' State Insurance Bill The
Employees' State Insurance Act came into force from 19th April 1948. The scheme
framed under the Act aims at providing for certain cash benefits to employees in the
event of sickness, maternity, employment injury, and medical facilities in kind, and
18 contains provisions for certain other matters having bearing thereon.
 The Employee’s State
25.2 APPLICABILITY OF THE ACT Insurance, Act, 1948

Under Section 1(4) of the Act, the implementation of the scheme.is territorial. The
Act applies in the first instance to all factories using power and employing 20 or
more persons on wages. The provisions of the Act have also been extended, or are
being gradually extended, under Section 1(5) of the Act to cover

a) Smaller power-using factories employing 10 to 19 persons;

b) Non-power using factories employing 20 or more persons;
c) Shops;
d) Hotels and restaurants;
e) Cinemas, including preview theatres;
f) Newspaper establishments; and
g) Road motor transport undertakings employing 20 or more persons.

The Act, however, does not apply to a mine or railway running shed,. and specified
seasonal factories. The State Government may extend the provisions of the Act to
cover other establishments or class of establishments, industrial, commercial,
agricultural or otherwise, in consultation with the Corporation and with the approval
of the Central Government, after giving six months notice of its intention to do so in
the Official Gazette.

25.3 DEFINITIONS
Employee

The term "employee" as defined under Section 2(9) of the Act, refers to any person
employed on wages in, or in connection with, the work of a factory or establishment
to which this Act applies. It has a wide connotation and includes within its scope
clerical, manual, technical and supervisory functions. Persons whose remuneration
(excluding the remuneration for over-time work) does not exceed Rs. 6,500 a month
are covered under the Act. The Act does not make any distinction between casual and
temporary employees or between technical and non-technical employees. There is
also no distinction between those employed on time-rate and piece-rate basis.
Employees employed directly by the principal employer and those employed by or
through a contractor on the premises of the factory and those employed outside the
factory premises under the supervision of the principal employer are all included
under the Act: It also covers administrative staff and persons engaged in the purchase
of raw materials or the distribution or sale of products and similar or related
functions. However, the definition of "employee" does not include any member of the
Indian naval, military or air force.

Wages

"Wages" means all remuneration paid in cash if the terms of the contract are fulfilled,
and includes any payment in any period of authorised leave, lockout or strike which
is not illegal or lay-off, and includes other remuneration paid at intervals not
exceeding two months but does not include

i) Contribution paid to the provident fund or pension fund;

ii) Travelling allowance or value of travelling concession;

iii) Sum paid to defray special expenses; and

iv) Gratuity payable on discharge. 19

Laws for Labour Welfare
and Social Security 25.4 CONTRIBUTIONS
The main sources of finance are the contributions from employers and employees and
one-eighth share of expenses by State Governments towards the cost of medical care.
Employees' contribution has to 6p calculated individually for each employee at 1.75
peg cent of the wages paid/payable for every wage period. The employers' -
contribution, however, may be calculated at the rate of 4.75 per cent of the total
wages paid to all the employees covered under the ESI Scheme in each wage period,
rounded to the next higher multiple of five paise. The total value of the combined
employers' and the employees' share has to be deposited in the State Bank of India or
in any other authorised bank or branch through a challan in quadruplicate as per the
Performa on or before the 21st of the month following the calendar month in which
the wages fall due,., A employer who fails to pay his contribution within the periods
specified shall be, liable to pay interest and damages for late payment under Section
85(B) of the Act: The Act has laid down the purposes for which the fund may be
expended. The accounts of the Corporation shall be audited by auditors. appointed by
the Central Government:-

Employees whose average daily wage is below, Rs. 15 are exempted from payment
of their contribution; only the employer's contribution will be payable at 4.75 per cent
in respect of such employees.

"Contribution period" and "benefit period" is fixed for the purpose of paying
contributions and deriving benefits under the Act. In respect of the contribution
period from 1st April to 30th September, the corresponding benefit period shall be
from 1st January of the year following, to 30th June, and in respect of the
contribution period from 1st October to 31st March of the year following, the
corresponding benefit period shall be from 1st July to 31st December of the year
following. In the case of a newly employed person, the first contribution period shall
commence from the date of his employment, and the corresponding first benefit
period shall commence on the expiry of 9 :months from the said date (Rule 2 and
Regulation 4). The daily rate at which sickness benefit is payable to an insured
employee during the period of his sickness is called "standard benefit rate"

25.5 REGISTRATION
The registration of a factory/establishment with the Employees' State Insurance
Corporation is a statutory responsibility of the employer under Section 2-A of the
Act, read with Regulation10-B. The owner of a. factory/establishment to which the
Act applies for the first time is liable to furnish to the appropriate regional office,
within 15 days after the Act becomes applicable, a declaration of registration .in
Form 01.. On receipt of the 01 Form] the regional office will examine the coverage;
and after it is satisfied that the Act applies-to the factory/establishment, will allot a
code number to the employer.

The forms for the registration of employees are the declaration form and return of
declaration forms (covering letter). The principal employer should get the declaration
form filled in by every employee covered under the scheme.

The statutory registers to be maintained up to date are,-:

a) Register of Employees;
b) Accident Book in which every accident to employees during the course of
employment is recorded; and
c) Inspection Book (to be produced before an Inspector or any other authorised
officer).

20 As and when required, certain other forms, such as ESIC 32,.ESIC 37, ESIC 53,
ESIC 71, ESIC 72, ESIC 86, ESIC 105, shall be filled up
 The Employee’s State
25.6 ADMINISTRATION Insurance, Act, 1948

The Scheme is administered by a corporate body called the Employees' State

Insurance Corporation. It comprises members representing vital interest groups like
employees, employers, the parliament, central and state governments and medical
profession. This broad based body is primarily responsible for policy planning,
decision making and oversees the functioning of the scheme through a Standing "
Committee drawn from the main corporate body. The Corporation is headed by
Union Minister of Labour as its Chairman.
The chief executive officer of the Corporation is its Director-,General, who is also an
ex-officio member of the Corporation and its Standing Committee, He is-responsible
for the formulation of policy, over-all supervision, co-ordination and liaison with
Central and State Governments. The ESIC has set up a network of regional and local
offices all over the country for the implementation of the Scheme. Each regional
office is under the charge of a Regional Director. The Regional Office maintains all
the records of insured persons within its area and administers local offices. The
medical benefit is administered by the concerned state governments except in Delhi
and Noida area of Uttar Pradesh where the Corporation runs the medical units
directly.

25.7 BENEFITS
All the benefits under the scheme are paid in cash except medical benefit, which is
given in kind. The benefits are:
a) Sickness and Extended Sickness Benefit: For sickness during any period, an
insured person is entitled to receive sickness cash benefits at the standard benefit
rate for a period of 91 days in any two consecutive benefit periods. The
eligibility condition for sickness benefit is that the contribution of an insured
person should have been paid/or payable for not less than half the number of
days of the corresponding contribution period. An insured person suffering
from, any special, long-term ailment - for example, tuberculosis, leprosy, mental
disease - is eligible for extended sickness benefit at a rate which is 40 % higher
than the standard,,., benefit rate, rounded to the next higher multiple of 5 paise,
for a period of 124/ 309 days. The Director General may enhance the duration of
extended sickness benefit beyond the existing limit of 400 days to a maximum,
period of 2 years in deserving cases duly certified by a medical board. The
facility of extension would be available up to the date on which the insured
person attains the age of 60 years. The rate of this benefit is 40 per cent more
than the standard benefit rates for 7 days for vasectomy and 14 days for
tubectomy. This is paid in addition to the usual sickness benefits.
b) Maternity Benefit: An insured woman is entitled to maternity benefit at double
the standard benefit rate. This is practically equal to full wages for a period of 12
weeks, of which not more than 6 weeks shall precede the expected date of
confinement. Additional maternity benefit is given in case of miscarriage. In
case of sickness arising out of pregnancy, confinement, premature birth `of a
child or miscarriage, an additional benefit is given for a period not exceeding
one month. The eligibility condition for maternity benefit is 80 days in one or
two preceding contribution periods of one year.
c) Disablement Benefit: If a member suffers an injury in the course of his
employment, he will receive free medical treatment and temporary disablement
benefit in cash, which is about 70 per cent of the wages, as long. as the
temporary disablement lasts, provided that the temporary disablement has lasted
for not less than 3 days, excluding the day of the accident. In case of permanent
total disablement, the insured person will be given a life pension at full rate i.e.,
about 70 per cent of his wages, while in case of partial permanent disablement, a
portion of it will be granted as life pension. The benefit is paid for-Sundays as
well. At the option of the beneficiary, the permanent disablement pension may
be commuted to a lump sum payment, if the rate of benefit is less than one rupee 21
and fifty paise per day.
 The Maternity Benefit Act, 1961

UNIT 26 THE MATERNITY BENEFIT ACT,

1961
Objectives

The Objectives of this unit are to:

• discuss the salient features of the Act

• present selected case law on the subject
Structure
26.1 Genesis of the Act
26.2 Applicability of the Act
26.3 Benefits
26.4 Restrictions on Employment
26.5 Forfeiture
26.6 Miscellaneous
26.7 Administration
26.8 Case Law
26.9 Self-Assessment Questions
26.10 Answers to Check Your Progress
26.11 Further Readings

26.1 GENESIS OF THE ACT

The Convention of "Protection of Motherhood" adopted in 1919 was the earliest
among the ILO Conventions. In 1921, the Government of India reported that it was
not possible to adopt the Convention passed in 1919 due to various reasons. A Bill
was brought before the Central Legislative Assembly by a private member in 1924;
urging the Government to make it compulsory for the employers to provide maternity
benefit to women workers. However, the Bill was opposed by the government on the
ground that the need for such a Bill was not felt and that if legislation was passed to
that effect, it might have adverse repercussions on the employment of women. The
Royal Commission on Labour, in its recommendations, also stressed the need for
suitable maternity legislation, at least for women employed permanently in non
seasonal factories. As the Government of India was slow to 'act on these
recommendations, the provincial governments took the lead. The Government of
Bombay passed the Maternity Benefit Act, way back in 1926.. It was followed by
Central Provinces, Madras, U.P., Bengal and some other provinces. The period of
leave, the quantum of benefit and the qualifying conditions varied slightly from
province. With a view to reducing the disparities relating to maternity protection
under different provincial or State enactments, the Central Government passed the
Maternity Benefit Act in 1961.

26.2 APPLICABILITY OF THE ACT

The Act extends to the whole of India and applies to every establishment, factory,
mine or plantation, including any such establishment belonging to the government
and to every establishment wherein persons are employed for the exhibition of
equestrian, acrobatic and other performances. The Act was brought into force in
mines with effect from 10 November 1963, after repealing the Mines Maternity
Benefit Act, 1941. The State government may extend all or any of the provisions of
the Act to any other establishment or class of establishments, industrial, commercial, 27
agricultural or
Laws for Labour Welfare and
Social Security otherwise. But the State government-can do so-only with the approval of the Central
Government, after giving not less than two months' notice, by a notification in the
Official Gazette, of its intention to do so. The-Act specifically excludes the
applicability of the provisions of the Act to any factory or other establishment to
which provisions of the Act to any factor or other establishment to which provisions
of the Act to any factor or other establishment to which provisions of the Employees'
State Insurance Act, 1948, apply for the time being. The Act was amended on May 1,
1976 to extend the benefits to all women employees earning more than the wage
ceiling in establishments covered by the E. S.I. Act.

26.3 BENEFITS
The Maternity Benefit Act is a piece of social legislation enacted to promote the
welfare of working women. It prohibits the working of pregnant women for a
specified period before and after delivery. It also provides for maternity leave and
payment of certain monetary benefits to women workers during the period when they
are out of employment because of their pregnancy. Further, the services of a woman
worker cannot be terminated during the. period of her absence on account of
pregnancy, except for gross misconduct.
The maximum period for which a woman can get maternity benefit is twelve weeks.
Of this, six weeks must be taken prior to the date of delivery of the child and six
weeks immediately following that date.
To be entitled to maternity leave, however, a woman must have actually worked for
not less than 80 days in the twelve months immediately preceding the day of her
expected delivery. Only working days are taken into account when calculating these
80 days. Weekly holidays and all leave - paid or unpaid - are not included. However,
if a workman is laid off from work, such periods will be deemed as working days.
To avail of the six weeks' leave before expected delivery,, a notice must be given in
writing stating the date of absence from work also a certificate of pregnancy. (There
is a form for both which must be filled in). The employer has to pay the maternity
benefit in advance for this period to the concerned employee or any person
nominated for this purpose.
For the six weeks' leave from the date of delivery, another notice must be sent
together with a certificate of delivery after the child is born. The employer has to pay
to the employee, or her nominees, maternity benefit within 48 hours of receiving this
notice. The failure to give notice for the subsequent six weeks does not, however,
disentitle a woman from maternity benefit.
Every woman entitled to maternity benefit is also entitled to a medical bonus of
rupees two hundred and fifty if no pre-natal and post-natal care have provided for by
the employer free. of charge.
In case of miscarriage, a woman is entitled to six weeks leave with pay from the day
of miscarriage. In this case, too, .she must give notice, together with a certificate of
miscarriage.
For illness arising-out of pregnancy, delivery, premature birth or miscarriage, a
woman employee can take extra leave up to a maximum period of one month. She
has, of course, to get a certificate from a doctor in the prescribed form. This leave can
be taken at any time during the pregnancy, or can be attached to the six weeks prior
to or after delivery or miscarriage.
With a view to encourage planned parenthood, the Act provides for (a) six weeks
leave with wages in cases of medical termination of pregnancy (MTP); (b) grant of
leave with wages for a maximum period of one month in cases of illness arising out
of MTP or tubectomy; and (c) two weeks' leave with wages to women workers who
undergo tubectomy operation.,
A female employee can ask for light work for one month preceding the six weeks
28 prior to her delivery or during these six weeks if, for any reason, she does not avail of
her leave,
Laws for Labour Welfare
and Social Security
UNIT 27 THE EMPLOYEES' PROVIDENT
FUNDS AND MISCELLANEOUS
PROVISIONS ACT, 1952
Objectives

The Objectives of this unit are to:

• discuss the salient features of the Act

• present selected case law on the subject

Structure
27.1 Genesis of the Act
27.2 Object of the Act
27.3 Applicability of the Act
27.4 Definitions
27.5 The Employees' Provident Fund Scheme, 1952
27.6 The Employees' Pension Scheme, 1995
27.7 The Employees' Deposit-Linked Insurance Scheme, 1976
27.8 Damages and Penalties
27.9 Administration
27.10 Case Law
27.11 Self-Assessment Questions
27.12 Answers to Chech Your Progress
27.13 Further Readings

27.1 GENESIS OF THE ACT

Legislation for compulsory institution of contributory provident fund in industrial
undertakings was discussed several times at tripartite meetings in which
representatives of the Central and State governments and of employers and workers
took part. A large measure of agreement was reached on the need for such legislation.
A non-official Bill on this subject was introduced in the Lok Sabha in 1948 to
provide for the establishment and grant of provident fund to certain classes of
workers by their employers. The Bill was withdrawn only on an assurance by the
government that it would soon consider the introduction of a comprehensive bill.
There was also a persistent dema that the Central Government extend the benefits of
Coal Mines Provident Fund Scheme to workers employed in other industries. The
view that the proposed legislation should be undertaken was largely endorsed by the
Conference of Provincial Labour Ministers' held in January 1951. On 15th November
1951, the Government of India promulgated the Employees' Provident Funds
Ordinance which came into force on that date. It was subsequently replaced by the
Employees' Provident Funds Act passed on 4th March 1952.

27.2 OBJECT OF THE ACT

The Act was passed with a view to making some provision for the future of the
industrial worker after his retirement or for his dependants in case of his early death
32 and inculcating the habit of saving among the workers. The object of the Act is to
provide substantial security and timely monetary assistance to industrial employees
 The Employee’s Provident
and their families when they are in distress and/or unable to meet family and social Funds and Miscellaneous
obligations and to protect them in old age, disablement, early death of the bread- Provisions Act, 1952
winner and in some other contingencies.

The Act provides for a scheme for the institution of provident fund for specified
classes of employees. Accordingly, the Employees' Provident Fund-Scheme was
framed under Section 5 of the Act, which came into force on 1st November 1952. On
a review of the working of the scheme over the years, it was found that provident
fund was no doubt an effective old age and survivorship benefit; but in. the event of
the premature death of an employee, the accumulations in the fund were not adequate
enough to render long-term financial protection to his family. This lacuna led to the
introduction of the Employees' Family Pension Scheme with effect from 1st March
1971. The Act was further amended in 1976 with a view to introducing Employees'
Deposit Linked Insurance Scheme, a measure to provide an insurance cover to the
members of the provident fund in covered establishments without the payment of any
premium by these members. Thus; three schemes have been framed under the
Employees' Provident Funds and Miscellaneous Provisions Act.

27.3 APPLICABILITY OF THE ACT

The Employees' Provident Funds and Miscellaneous Provisions Act, 1952 is
applicable from the date of functioning or date of set-up of establishments provided
the factory/establishment employed twenty or more persons. The Act, however, does
not apply-to co-operative societies employing less than 50 persons and working
without the aid of power. The Central Government is empowered to apply the
provisions of this Act to any establishments employing less than 20 persons after
giving not less than two months' notice of its intention to do so by a notification in
the Official Gazette. Once the Act is applied, it does not cease to be applicable even
if the number of employees falls below 20. An establishment/factory, which is not
otherwise coverable under the Act, can be covered voluntarily with the mutual
consent of the Act.

27.4 DEFINITIONS
Employee

"Employee" as defined in Section 2(f) of the Act means any person who is employed
for wages in any kind of work manual or otherwise, in or in connection with the work
of an establishment and who gets wages directly or indirectly from the employer and
includes any person employed by or through a contractor in or in connection with the
work of the establishment.

Employer

In relation to a factory establishment, as per Section 2(e) of the Act the employer
means the owner or occupier including the agent of such owner or occupier, the legal
representative of a deceased owner or occupier and where a person has been named
as a manager' of the factory and in relation to other establishment, the person who has
the ultimate control over the affairs of the establishment.

Membership

Employees drawing a pay not exceeding Rs. 5,000 per month are eligible for
membership of the fund. Every employee employed in or in connection with the
work of a factory or establishment shall be entitled and required to become a member
of the fund from the date of joining the factory or establishment.
33
Laws for Labour Welfare
and Social Security
27.5 THE EMPLOYEES' PROVIDENT FUND SCHEME,
1952
Contribution
The statutory rate of contribution to the provident fund by the employees and the
employers, as prescribed in the Act, is 10% of the pay of the employees. The term
"wages" includes basic wage, dearness allowance, including cash value of food
concession and retaining allowance, if any. The Act, however, provides that the
Central Government may, after making such enquiries as it deems fit, enhance the
statutory rate of contribution to 120k of wages in any industry or class of
establishments.
The contributions received by the Provident Fund Organisation from unexempted
establishments as well as by the Board of Trustees from exempted establishments
shall be invested, after making payments on account of advances and final
withdrawals, according to the pattern laid down by the Government of India from
time to time. The exempted establishments are required to follow the same pattern of
investments as is , prescribed for the unexempted establishments. The provident fund
accumulations are invested in government securities, negotiable securities or. bonds,
7-year national saving certificates or post office time deposits schemes, if any. .
EPF Interest Rate
Under Para 60(1) of the Employees' Provident Fund Scheme, the Central
Government, on the recommendation of the Central Board of Trustees, declares the
rate of interest to be credited annually to the accounts of provident fund subscribers.
Withdrawals
Under the scheme, a member may withdraw the full amount standing to his credit in
the fund in the event of
i) Retirement from service after attaining the age of 55;
ii) Retirement on account of permanent and total incapacity;
iii) Migration from India for permanent settlement abroad; and
iv) Termination of service in the course of mass retrenchment (involving 3 or more
persons). The membership for this purpose is reckoned from the time of joining
the covered establishment till the date of the settlement of the claim,
A member can withdraw up to 90 % of the amount of provident fund at credit after
attaining the age of 54 years or within one year before actual retirement on
superannuation whichever is later.
The Scheme provides for non-refundable partial withdrawals/ advances to meet
certain contingencies
1) Financing of life insurance policies;
2) House-building;
3) Purchasing shares of consumers co-operative credit housing societies;
4) During temporary closure of establishments;
5) Illness of member, family members;
6) Member's own marriage or for the marriage of his/her sister, brother or
daughter/ son and post-matriculation education of children;
7) Damages to movable and immovable property of members due to a calamity of
exceptional nature;
8) Unemployment relief to individual retrenchee members;
34 9) Cut in supply of electricity to the factory/establishment; and
 The Employee’s Provident
10) Grant of advance to members who are physically handicapped for the .purchase Funds and Miscellaneous
of equipment. Provisions Act, 1952
Nomination
If there is no nominee, the amount shall be paid to the members of the family in-
equal shares except:
a) Sons who have attained majority;
b) Sons of a deceased son who have attained majority;
c) Married daughters whose husbands are alive;
d) Married daughters of a deceased son whose husbands are alive.
The nomination form shall be filled in duplicate and one copy duly accepted by the
provident fund office will be. kept by members. Incase of change, a separate form for
a fresh nomination should be filled in duplicate.
Transfer
When a member leaves service in one establishment and obtains re-employment in+
another establishment, whether exempted or unexempted, in the same region or in
another region, he is required to apply for the transfer of his provident fund account
to the Regional Provident Fund Commissioner in the prescribed form. The actual
transfer of the provident fund accumulations with interest thereon takes place in cases
of:
i) Re-employment in an establishment, whether exempted or unexempted, in
another region/sub-region;
ii) Re-employment in an exempted establishment in the same region/sub-region;
iii) Leaving service in an exempted establishment and re-employment in an
unexempted establishment;
iv) Re-employment in an establishment not covered under the Act
A member of the fund is entitled to get full refund of both the shares of contributions
made by him as well as by his employer with interest thereon immediately after
leaving the service.
Account Slaps
As soon as possible after the completion of each accounting year, every member of
the fund shall be supplied with an account slip showing:
a) The opening balance;
b) The amount contributed during the year;
c) The amount of interest credited or debited during the year; and
d) Closing balance,
Errors, if any, should be brought to the notice of the Commissioner within six months.

Exemption

An establishment/factory may be granted exemption under Section 17 if, (i) in the

opinion of the appropriate government, the rules of its provident fund with respect to
the rates of contributions are not less favourable than those specified in Section 6 of
the Act, and (ii) if the employees are also in enjoyment of other provident fund
benefits which on the whole are not less favourable than the benefits provided under
the Act or any scheme in relation to the employees in any other establishment of a
similar character. While recommending to the appropriate government grant of
exemption under this section, the Employees' Provident Fund Organisation usually
takes into consideration the rate of contribution, the eligibility clause, the forfeiture
clause and the rate of interest. Also, the totality of the benefits provided under the
rules of the exempted funds is taken into consideration. 35
Laws for Labour Welfare The Central Government is empowered to grant exemption to any class of and soda]
and Social Security security establishments from the operation of the Act for a specified period, on
financial or another grounds under section 16(2). The exemption is granted by issue
of notification in the Official Gazette and subject to such terms and conditions as
may be specified in the notification. The exemptions does not amount to total
exclusion from the provisions of the Act. The exempted establishments are required
to constitute a Board of Trustees according to the rules governing the exemptions to
administer the fund, subject to overall control of the Regional Provident Fund
Commissioner. The exempted establishments are also required to maintain proper
accounts, submit prescribed returns, invest provident fund accumulations in the
manner prescribed by the central Government from time to time, and to pay
inspection charges. Exemption is liable to be cancelled for breach of any of these
conditions.

27.6 THE EMPLOYEES' PENSION SCHEME, 1995

Introduction
Employees' Pension Scheme 1995 has been made applicable on 16.11.1995
retrospectively with effect from 1.4.1993. This new Scheme replaces the erstwhile
Family Pension Scheme, 1971.
Membership
i) Every member of the Employees' Provident Scheme 1952 and opted for
Employees Family Pension Scheme 1971.
ii) All new entrants to the Employees' Provident Fund Scheme 1952 will become
member of the Employees' Pension Scheme 1995 on compulsory basis.
iii) Every employee who has ceased to be a member of the Employees Family
Pension Scheme 1971 during 1.4.1993 and 15.11.1995 was given option to
become member of the Employees' Pension Scheme 1995 upto 31.3.1998.
iv) Every existing member of the Employees' Provident Fund Scheme 1952 not
being member of Family Pension Scheme 1971 has option to become member of
Employees' Pension Scheme, 1995.
Option Requirement
i) Members who have died during 1.4.1993 and 15.11.1995 shall be deemed to
have exercised option of joining Employees' Pension Scheme 1995 with effect
from the date of death:
ii) Members who are alive may exercise option to become member of the
Employees' Pension Scheme 1995 on the date of exit from the employment by
depositing amount along with interest at the rate of 8.5 per cent per annum from
the date of such withdrawal.
iii) Members will have option to join Employees' Pension Scheme 1995 by
depositing the contribution along with up to date interest under ceased
Employees' Family Pension Scheme 1971 with effect from 1.3.1971.
Contribution
Employee is not required to contribute separately under the Employees' Pension
Scheme 1995. Employer share of provident fund contribution at the rate of 8.33 % is
diverted to pension fund every month
Service for Pension
Actual service rendered after 16.11.1995 together with the service for which the
contribution has been made under the eased Family Pension Scheme 1971, if any will
be treated as service for pension.
A person is entitled for pension after, completing the age of 58 years with minimum
36 service of 10 years.
Laws for Labour Welfare
and Social Security
UNIT 28 THE PAYMENT OF GRATUITY
ACT, 1972
Objectives

The Objectives of this unit are to:

• discuss the salient features of the Act

• present selected case law on the subject
Structure
28.1 Genesis of the Act
28.2 Object of the Act
28.3 Applicability
28.4 Definitions
28.5 Payment of Gratuity
28.6 Forfeiture
28.7 Exemption
28.8 Nomination
28.9 Settlement of Claims
28.10 Offences and Penalties
28.11 Miscellaneous
28.12 Case Law
28.13 Self-Assessment Questions
28.14 Answers to Check Your Progress
28.15 Further Readings

28.1 GENESIS OF THE ACT

Gratuity as an additional retirement benefit has been secured by labour in numerous
instances, either by agreement or by awards. It was conceded as a provision for old
age and a reward for good, efficient and faithful service for a considerable period.
But in the early stages, gratuity was treated as a payment gratuitously made by an
employer at his will and pleasure. In the course of time, gratuity came to be paid as a
result of bilateral agreements or industrial adjudication. Even though the payment of
gratuity was voluntary in character, it had led to several industrial disputes. The
Supreme Court had laid down certain broad principles to serve as guidelines for the
framing of the gratuity scheme. They were
1. The general financial stability of the concern;
2. Its profit-earning capacity;
3. Profits earned in the past;
4. Reserves and the possibility of replenishing the reserves; and
5. Return on capital, regard being had to the risk involved.
The first central legislation to regulate the payment of gratuity was, the Working
Journalists (Conditions of Service). and Miscellaneous Provisions Act, 1955. The
Government of Kerala enacted legislation in 1971, for payment of gratuity to workers
employed in factories, plantations, shops and establishments. In 1971, the West
42 Bengal Government promulgated an ordinance which was subsequently replaced by
 The Payment of Gratuity
the West Bengal Employees' Payment of Compulsory Gratuity Act, 1971. After the Act, 1972
enactment of these two Acts, some other state governments also voiced their
intention of enacting similar measures in their respective states. It became necessary,
therefore, to have a Central law on the subject so as -
1. To ensure a uniform pattern of payment of gratuity to the employees throughout
the country, and
2. To avoid different treatment to the employees of establishment having branches
in more than one state, when, under the conditions of their service, the
employees were liable to transfer from one state to another.
Hence the Government of India enacted a legislation on gratuity. The Act came into
force from September 16, 1972. The Payment of Gratuity Central Rules also came
into force from September 16, 1.972.

28.2 OBJECT OF THE ACT

The Act provides for a scheme of compulsory payment of gratuity to employees
engaged in factories, mines, oilfields, plantations, ports, railway companies, motor
transport undertakings, shops or other establishments and for matters connected
therewith or incidental thereto.

28.3 APPLICABILITY
The Act is applicable to:
1. Every factory, mine, oilfield, plantation, port and railway company;
2. Every shop or establishment within the meaning of any law for the time being in
force in relation to shops and establishments in a state; in which 10 or more ,
persons are employed or were employed on any day of the preceding 12 months;
3. To every motor transport undertaking in which 10 or more persons are employed
or were employed on any day of the preceding 12 months;
4. Such other establishments or class of establishments in which 10 or more
employees are employed or were employed on any day of the preceding 12
months, as the Central Government may, by notification, specify in this behalf.
A shop or establishment once covered shall continue to be covered notwithstanding
that the number of persons employed therein at any time falls below 10.

28.4 DEFINITIONS
Completed Year of Service

The term `completed year of service' means continuous service for one year. 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 imposing a punishment or penalty or treating the
absence as break in service has been passed in accordance with the standing orders,
rules or regulation governing the employees of the establishment), lay-off, strike or a
lockout or cessation of work not due to any fault of the employees, whether such
uninterrupted or interrupted service was rendered before or after the commencement
of this Act.

1. Where an employee (not being an employee employed in a seasonal

establishment) is not in continuous service within the meaning of the above
clause for any period of one year or six months, he shall be deemed to be in
continuous service under the employer if he has actually worked for 190 days 43
Laws for Labour Welfare
and Social Security during the preceding 12 months in an establishment which works less than 6
days a week and 240 days in any other case;

2. Further, for determining the continuous period of six months, an employee

should have completed 95 days in an establishment which works for not less
than 6 days in a week and 120 days in any other case.
Employee
An employee is a person (other than apprentice) employed on wages (no wage
ceiling) in any establishment, factory, mine, oilfield, plantation, railway company or
shop, to do any:-skilled, semi-skilled or unskilled, manual, supervisory, technical or
clerical work, where the terms of such employment are express or implied, and
includes any such person, who is employed in a managerial or administrative
capacity, but does not include any person who holds a civil post under the Central
Government or a State Government, or who is subject to the Air Force Act, 1950, the
Army Act, 1950, or the Navy Act, 1957.
The fancily consists of
i) In the case of a male employee, himself, his wife, his children, whether married
or unmarried, his dependant-parents and the widow and children of his
predeceased son, if any;
ii) In the case of female employee, herself, her husband, her children, whether
married or unmarried, her dependant parents, and the dependant parents of her
husband, and the widow and children of her predeceased son, if any.
A female employee can exclude her husband from her family by a notice in writing to
the controlling authority. In such event, her husband and his dependent parents will
not be deemed to be included in her family unless the said notice is subsequently
withdrawn.
Wages
The term `wages' under the Act 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, overtime wages and any other allowance.
Retirement
The term- "retirement' has been defined under the Act as the termination of the
service of an employee otherwise than on superannuation. Superannuation means the
attainment of such age by the employee a$ is fixed in the contract or conditions of
service as the age on the attainment of which he has to leave the employment where
there is no such provision, then attainment of the age of 58 years by the employee.

28.5 PAYMENT OF GRATUITY.

Section 3 authorises the appropriate- government to appoint any officer as a
controlling authority for the administration of the Act. In Maharashtra, the labour
courts in different localities are notified as controlling authorities and the President,
Industrial Court; is an appellate authority under the Act. `
Gratuity is payable to an employee on the termination of his employment after he has
rendered continuous service for not less than 5 years - on his superannuation; or on'
his retirement or resignation; or on his death or disablement due to accident or
disease. However, the completion of 5 years of continuous service for earning
gratuity is not necessary if the termination of the employment of any employee is due
to death or disablement. In case of death of the employee gratuity is payable to his
nominee or to the guardian of such nominee.
For every completed year of service or apart, thereof its excess of six months, the
employer has to pay gratuity to an employee at the rate of 15 days wages based on the
44 rate of wages last drawn by the concerned employee. In the case of Piece-rated
 The Payment of Gratuity
employee, daily wages are computed on the average of the total wages received by Act, 1972
him for a period of 3 months immediately preceding the termination of his
employment. For this purpose, the wages paid for any overtime work will not be
taken into account. In the case of an employee employed in a seasonal establishment,
and who is not so employed throughout the year, the employer shall pay gratuity at
the rate of 7 days wages for each season.

The amount of gratuity payable to an employee is not to exceed rupees three lakhs
and fifty thousand.

The right of employees to receive better terms of gratuity under any award or
agreement or contract with the employer is not taken away by this Act.

28.6 FORFEITURE
If the services of an employee have been terminated for any act of wilful omission or
negligence causing any damage or loss to, or destruction of, property belonging to the
employer, his gratuity can be forfeited to the extent of the damage or loss so caused
to the employer. The gratuity payable to an employee can be wholly forfeited, if the
services of such employee have been terminated for his riotous or disorderly conduct
- or any other act of violence or an offence involving moral turpitude committed by
him in the, course of his employment.

28.7 EXEMPTION
The Act provides for the 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.

28.8 NOMINATION
An employee who has completed one year of service has to name his/her nominee in
the prescribed form. An employee in his nomination can distribute the amount of
gratuity amongst more than one nominee. If an employee has a family at the time of
making the nomination, it has to be made in favour of one or more members of the
family. If nomination is made in favour of a person who is not a member of his
family, the same is void. However, if the employee has no family at the time of
making a nomination, he can make the nomination in favour of any person. But is
such employee acquires a family subsequently, then such nomination becomes
invalid forthwith, and thereafter the employee has to make a fresh nomination in
favour of one or more members of his family: Nomination once made can be
modified after giving due notice to the employer, If a nominee predeceases the
employee, a fresh nomination is required to be made:

A person who is entitled to gratuity has to apply himself/herself or, through an

authorised person to the employer for gratuity within the prescribed time. Even if the
application is made after the prescribed time, the employer has to consider the same.
Similarly, the employer has to give notice to the person entitled to gratuity and to the
controlling authority immediately after it became payable, specifying the amount of
gratuity, and thereafter make .arrangements for its payment.

28.9 SETTLEMENT OF CLAIMS

The employee and' the employer or any other person raising the dispute regarding the
amount of gratuity may make an application to the controlling authority to decide the
dispute. No appeal by and employer shall be admitted unless the employer produces a
certificate of the controlling authority-to the effect that he has deposited with the
controlling authority an amount equal to the amount of gratuity required to be 45
deposited or deposits with the appellate authority such amount