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CMA Intermediate · Business Laws and Ethics · Payment of Gratuity Act, 1972

Kiran is employed by a private firm on a fixed term contract of 18 months, which expires on schedule. Under Section 53 of the Code on Social Security, 2020, which statement is correct?

Gratuity is payable on a pro rata basis. Section 53(1)(d) covers termination on fixed term expiry, the second proviso waives the five-year continuous service condition, and the third proviso to Section 53(2) requires pro rata gratuity for fixed term employees.

  1. ANo gratuity is payable because he has not completed five years
  2. BGratuity is payable on pro rata basis, as the five-year condition is not necessary on expiry of a fixed termCorrect
  3. CGratuity is payable only if he completes at least three years
  4. DGratuity is payable at the full rate of fifteen days' wages for each completed year after rounding up to five years

Explanation

Section 53(1)(d) lists termination of a fixed term contract as a payment event. The second proviso removes the five-year requirement on expiry of fixed term employment. The third proviso to Section 53(2) requires gratuity on a pro rata basis. Hence it is payable pro rata, not denied or rounded up to five years.

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