What is gratuity? Who is entitled to claim gratuity?

Gratuity is the total amount payable to a ‘workman’ in the private sector based on his salary and the period of service, over and above six months, when he leaves service. The law that deals with matter of gratuity is provided for in “The Industrial and Commercial Employment (Standing Orders) Ordinance, 1968.

In order to establish whether the claim for gratuity holds ground, following essentials require determination:

  • The employee must be a ‘workman’ in ‘industrial’ or ‘commercial establishment’ or ‘construction industry’,
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  • He must be a ‘workman’ i.e. any person employed in any industrial or commercial establishment to do any skilled or unskilled, manual or electrical work for hire or reward,
  • ‘Workman’ must not have been terminated on ground of misconduct,
  • In case of commercial establishment or construction industry, the said establishment should either employ or had employed 20 or more workmen on any day during the preceding 12 months,
  • In case of industrial establishment, it should either, at the time of the claim, employ or had employed 50 or more workmen on any day during the preceding 12 months. However, Government may, by notification in the official Gazette, extend all or any of the said provisions to any such industrial establishment or any class of such establishments.

Formula for calculating the amount of gratuity payable to a workman:
30 days salary or last highest drawn salary in twelve months, into number of years (or part thereof) he has served.