Gratuity not paid: how to claim it from the Controlling Authority

What this is

Gratuity is a lump sum your employer must pay you when your job ends after long service. It is not a gift or a bonus; the Payment of Gratuity Act, 1972 makes it a legal right, and Section 14 says the Act overrides anything inconsistent in a contract.

A gratuity claim is what you do when the employer does not pay, pays less, or says you are not entitled. The claim goes to the Controlling Authority — an officer the government appoints to run the Act for an area (Section 3). It can call both sides, take evidence and order payment, with the powers of a civil court for that purpose (Section 7(5)).

When it applies

1. The employer is covered. The Act applies to every factory, mine, oilfield, plantation, port and railway company, and to every shop or establishment in which ten or more persons are employed, or were employed on any day of the preceding twelve months (Section 1(3)). Once covered, always covered, even if the staff later falls below ten.

2. You are an "employee". Section 2(e) covers anyone, other than an apprentice, employed for wages in any kind of work, manual or otherwise. Unlike the Industrial Disputes Act, there is no salary limit and managers are included. People holding a government post who have their own gratuity rules are left out.

3. Your job has ended. By superannuation, retirement, resignation, death, or disablement due to accident or disease (Section 4(1)). "Retirement" is defined as any ending of service other than superannuation (Section 2(q)), so a termination by the employer counts too.

4. Five years of continuous service. Not needed if the job ended by death or disablement. Continuous service includes periods broken by sickness, accident, leave, a lay-off, a lawful strike, or a lock-out that was not your fault (Section 2A(1)). If your service was not unbroken, you are treated as having served a year if you actually worked at least 240 days in the twelve months — 190 days below ground in a mine or where the establishment works less than six days a week (Section 2A(2)).

How the amount is worked out

Section 4(2) sets the rate at fifteen days' wages for every completed year of service, or part of a year over six months, at the wages you last drew.

• Monthly-paid: fifteen days' wages = last monthly wages ÷ 26 × 15.
• Years: count completed years, and add one more if the extra part is over six months. Seven years and eight months counts as eight; seven years and five months counts as seven.
• Wages means what you earn on duty or leave and are paid in cash, including dearness allowance, but not bonus, commission, house rent allowance, overtime or other allowances (Section 2(s)). For most people that means basic pay plus dearness allowance.
• Piece-rated: the daily wage is the average over the last three months, leaving out overtime.
• Seasonal establishments: seven days' wages for each season.

So the formula is: (basic + DA) ÷ 26 × 15 × years of service, up to the ceiling the Central Government notifies (Section 4(3)). Better terms in your contract or an award still apply (Section 4(5)).

The steps and the timeline

1. Apply to the employer in writing (as soon as the job ends). Section 7(1) asks the person eligible to send a written application to the employer, in the form and within the time the rules prescribe. Give your dates of joining and leaving, your last basic pay and dearness allowance, your calculation, and your bank details. Keep proof of sending.

2. The employer works out and notifies the amount. As soon as gratuity becomes payable — whether you applied or not — the employer must work out the amount and tell both you and the Controlling Authority in writing (Section 7(2)).

3. Payment within thirty days. The employer must pay within thirty days of the date gratuity becomes payable (Section 7(3)). If it does not, it owes simple interest from that date until payment, at the rate the Central Government notifies (Section 7(3A)), unless the delay was your fault and the Controlling Authority permitted it in writing.

4. If there is a dispute, apply to the Controlling Authority. If the employer disputes the amount, your entitlement or who should receive it, it must deposit the amount it admits with the Controlling Authority. You — or the employer — can apply to the Controlling Authority to decide the dispute (Section 7(4)). The Controlling Authority holds an inquiry, gives both sides a reasonable chance to be heard, and directs the employer to pay what it finds due, less anything already deposited.

5. Appeal (within sixty days). Either side can appeal the order to the appropriate government or the appellate authority it names, within sixty days of receiving the order; this can be extended by another sixty days for sufficient cause. An employer must first deposit the amount ordered (Section 7(7)).

6. Recovery. If the employer still does not pay, apply to the Controlling Authority, which — after giving the employer a chance to show cause — issues a certificate to the Collector. The Collector recovers the amount like land revenue, with compound interest at the notified rate, the interest capped at the amount of the gratuity (Section 8).

Not paying gratuity is also an offence. Section 9 provides imprisonment of at least six months and up to two years for an employer who does not pay gratuity due under the Act, unless the court records reasons for a lighter sentence.

Documents needed

• Appointment letter and the relieving letter, resignation acceptance or termination letter.
• Salary slips showing basic pay and dearness allowance, especially the last one.
• Service certificate, experience letter or PF passbook showing your years of service.
• Your written gratuity application to the employer and proof it was sent.
• Any reply or calculation from the employer.
• For a death claim: the death certificate, the nomination form, and proof of heirship if there is no nominee. See Someone has died: succession and legal heirs.

What it costs

• Applying. The form and any fee are set by the rules under the Act; the Controlling Authority's office will tell you.
• The advocate's fee. It depends on the city and whether the employer contests. The advocate quotes it before you pay.

What the advocate does

• Checks that the employer is covered and works out your continuous service, wages and amount, including interest.
• Drafts your application to the employer and to the Controlling Authority.
• Presents your service record and calculation at the hearing, and answers any claim of forfeiture.
• Handles the appeal if either side appeals, and applies for recovery if the order is not obeyed.

An independent advocate from our panel can take it on. They review your papers and quote their fee before you pay. eMunshi is a technology platform, not a law firm; the advocate you choose represents you.

The document that comes before it

Your own written application to the employer under Section 7(1) comes first. If your PF was also not deposited or released, raise that separately with the EPFO: eMunshi's PF complaint is written from your answers, for ₹999. See PF stuck or not deposited.

Mistakes that sink claims

• Counting gross salary instead of basic pay plus dearness allowance. The claim looks inflated and loses credibility.
• Ignoring the six-month rule. A part-year over six months counts as a full year.
• Accepting "you resigned, so no gratuity". Resignation after five years is covered.
• Not applying to the employer in writing first.
• Missing the sixty days to appeal an order you disagree with.

Not sure of your numbers? A 30-minute call with an independent advocate starts at ₹999. If you also lost your job unfairly, see the first-steps guide.