Tuesday, 15 November 2016

CA IPCC Gratuity Act Law Notes 5 Min Revision NOTES

CA IPCC Gratuity Act Law Notes | 5 Min Revision |IPCC LAW NOTES MAY/NOV 2017 |

As Part of CA IPCC Law.  Notes Edition, Entire Gratuity Act has been provided as a 3 Minute Summary for quick revision before exam. The Entire Chapter has been explained with simple language and easy examples.
The Act applies to every Factory, Mine, Port, Railway Company and Establishments employing 10 or more people.
The Act applies to Temples also [Shree Jagannath Temple Vs Jagannadh Padhi].

5 Continuous Years:

Gratuity shall be payable to employees who have worked for straight 5 Continuous Years in an organisation.
In order to say that an employee has worked for One Continuous Year, the employee must have worked for at least:
> 190 days (if the employee is working in an underground Mine, or if the organisation works only 5 days a week).
> 240 days in any other case.
For Example: Mr.Ramesh is working in Google. Google works only from Mon to Friday. So, For the last year, Ramesh must have actually worked for at least 190 Days to say that he has worked for One Continuous Year.

Seasonal Establishments:

In case of Seasonal establishments, an employee is said to have worked for One Continuous Year, if he has actually worked for at least 75% of total working days of that Seasonal Establishment.
For Example, Mr. Vikram is working in a Fire Crackers Factory in Nagpur. Last Year, the factory has run for only 140 days. So, Vikram is said to be in work for One Continuous Year if he has worked for at least  98 days (75% of 140 days).

Certain Days to be Included:

While calculating the working days of an employee above (190, 240 and not 75% days), the following days shall also be added, even though the employee hasn’t come to the factory:
  • He has been laid-off of certain days
  • leave with full wages
  • Maternity Leave (max of 12 weeks)
  • He has been absent due to temporary disablement caused by accident arising out of and in the course of his employment

Amount of Gratuity Payable:

In case of monthly rated employee:
Gratuity = Last drawn wages X 15/26 X completed/part years of service

In case of piece rated employee:
Gratuity = Ave of Last 3 Month Wages X 15/26 X completed years of service

In Case of Seasonal Establishment:
Gratuity = Last Drawn Wages X 7/26 X completed years of service

“The Maximum Amount of Gratuity Payable to an employee is Rs.10,00,000”

Gratuity in case of disabled employee:

If an employee becomes disabled due to an
accident, and was re-employed in the same organisation for reduced wages, Gratuity shall be calculated twice. Once, up to the date of accident with that salary and Second, For the period subsequent to the disablement.
For Example: Mr.Vivek is a Manager in Reliance. He is drawing a salary of Rs.1,00,000 for the past 10 continuous years. On Jan 1st, 2014 he met with an accident and lost both his legs. Reliance re-employed him for a Clerk Job for a Salary of Rs.25,000.
Vivek is retiring today. So, Gratuity calculation shall be made twice.
One calculation upto 1st Jan 2014 by taking Rs.1,00,000 as Last Drawn wages and Second calculation for the subsequent period by taking last drawn wages as Rs.25,000


Every employee who has completed 1 year of service, is compulsorily required to make a nomination. The nomination must be made within 30 days of completion of one year of service.
If an employee has a family at the time of making a nomination, the nomination shall be made in favour of one or more members of his family, and any nomination made by such employee in favour of a person who is not a member of his family shall be void.