AMENDMENTS TO THE PAYMENT OF GRATUITY ACT, 19722 The Payment of Gratuity (Amendment) Bill, 2009 as passed by both the Houses of Parliament has amended the definition of ‘employee’ contained in the Payment of Gratuity Act, 1972 for covering teachers in private institutions. (b) replacing the ceiling of twenty month’s wages for payment of gratuity by a monetary ceiling of Rs.50,000/- (c) making it obligatory for the employers to pay simple interest at a specified rate if the gratuity is not paid within 30 days from the date it falls due.For the information of the readers, it may be pointed out here that the Payment of Gratuity Act, 1972 has been amended five times so far. (ii) The second amendment made by the Payment of Gratuity (Second Amendment) Act, 1984 inter alia re-defined the term ‘continuous service’ and provided for grant of exemption to a class of employees from the operation of the Act. (iii) The third amendment made by the Payment of Gratuity (Amendment) Act, 1987 inter alia provided for:- (a) raising the wage limit for coverage from Rs.1,600/- to Rs.2,500/- per month, which was further raised to Rs.3,500/- p.m. (d) Compulsory insurance/setting of gratuity fund for payment of gratuity.As mentioned earlier, the Payment of Gratuity Act, 1972 was enacted and brought into force from 16 September 1972.
Therefore, the schools under the control of local bodies were covered under the Act with effect from 8.1.1982 itself.The amendments made are as given below:- (i) The first amendment made by the Payment of Gratuity (Amendment) Act, 1984 inter alia provides for raising the wage limit for coverage from Rs.1000/- to Rs.1600/- per month and appointment of Inspectors. The amendments at (a) to (c) above were brought into force w.e.f. The amendment at (d) has not been brought into force so far. (v) The Fifth Amendment made by the Payment of Gratuity (Amendment) Act, 1998 has enhanced the ceiling on maximum amount of gratuity from Rs.In fact, this particular provision is being reviewed in view of certain subsequent developments. one lakh to Rs.3.50 lakh with effect from 24.9.1997.The liability for payment of gratuity vests in the employer.Gratuity is payable in addition to pension or contributory provident fund, if any.The rate of simple interest mentioned at (c) above has been fixed at 10% per annum w.e.f. (iv) The fourth amendment made by the Payment of Gratuity (Amendment) Act, 1994 inter alia provided for:- (a) Doing away with the wage ceiling altogether for coverage under the Payment of Gratuity Act, 1972; (b) Enhancing the ceiling of the maximum amount of gratuity from Rs.50,000/- to Rs. Background of the present amendments Before the enactment of the Payment of Gratuity Act, 1972, there were two State Laws providing for payment of gratuity.These were the Kerala Industrial Employees ‘Payment of Gratuity Act, 1970 and the West Bengal Employees’ Payment of Gratuity Act, 1971.It has also been extended to motor transport undertakings employing ten or more workers.Under the Act, gratuity is payable at the rate of fifteen days’ wages for every completed year of service or part thereof in excess of six months subject to a monetary ceiling of Rs.3.50 lakh.It was brought into force with effect from the 16.9.1972 vide S. No.601 (E) dated 16.9.1972 and it extends to whole of India.The Act has been recently extended to the State of Sikkim w.e.f. The Act provides for payment of gratuity to employees employed in any factory, mine, oilfield, plantation, port, Railway Company and in any shop or establishment employing ten or more workers.