Gratuity - Definition - Law Dictionary Home Dictionary Definition gratuity

Definition :

Gratuity, it is a kind of retirement benefit like the provident fund or pension. At one time it was treated as payment gratuitously made by the employer to his employee at his pleasure but as a result of a long series of decisions of industrial tribunals gratuity has now come to be regarded as a legitimate claim which workmen can make and which, in a proper case, can give rise to an industrial dispute. Gratuity paid to workmen is intended to help them after retirement, whether the retirement is the result of the rules superannuation or of physical disability, Indian Hume Pipe Co. Ltd. v. Workmen, AIR 1960 SC 251: (1960) 2 SCR 32.

Gratuity is a retiral benefit and can be earned as a matter of right on fulfilling the conditions subject to which it is earned, any rule conferring absolute discretion not testable on reason, justice or fair play must be treated as utterly arbitrary and unreason-able and discarded, Sudhir Chandra Sarkar v. Tata Iron and Steel Co. Ltd., AIR 1984 SC 1064 (1071): (1984) 3 SCC 369: (1984) 3 SCR 325.

Gratuity is essentially a retiring benefit payable to a workman which as per the statute has been made payable on voluntary resignation as well. Gratuity is a reward for good, efficient and faithful service rendered for a considerable period. A workman gains experience during his tenure of employment, D.T.C. Retired Employees Association v. Delhi Transport Corporation, AIR 2001 SC 1997: (2001) 6 SCC 61. See also British Paints (India) Ltd. v. Workmen, AIR 1966 SC 732; Workmen v. Ahmedabad Municipal Corporation, 1955 AC 155.

The fundamental principle in allowing gratuity is that it is a retirement benefit for long services, a provision for old age and the trend of the recent authorities as borne out from various awards as well as the decisions of this Tribunal is in favour of double benefit, Workmen v. Ahmedabad Municipal Corpn. (1955 LAC 155).

In labour jurisprudence the concept of 'gratuity' has undergone a metamorphosis over the years. The dictionary meaning may suggest that gratuity is a gratuitous payment, a gift or a boon made by the employer to the employee as per his sweet-will. It necessarily means that it is in the discretion of the employer whether to make the payment or not and also to choose the payee as well as the quantum of payment. However, in the industrial adjudication it was considered as a reward for a long and meritorious service and its payment, therefore, depended upon the duration and the quality of the service rendered by the employee, Bakshish Singh v. Darshan Engg. Works, AIR 1994 SC 251 (258): (1994) 1 SCC 9. (Payment of Gratuity Act, 1972, s. 4