Compulsory Insurance: [Section 4(A)]
Employers liability to obtain insurance: The Payment of Gratuity(Amendment) Act, 1987 has prescribed provisions for compulsory insurance for employees, which introduces employer’s liabilities for payment towards the gratuity under the Act from LIC established under LIC of India Act, 1956 or any other prescribed insurance company. However, employer of an establishment belonging to or under the control of the Central Government or the State Government are exempted from the operations of these provisions.
Exemption to the employers from obtaining insurance: The Appropriate Government may also exempt (i) employers who have already established an approved gratuity fund in respect of his employees and who desires to continue such arrangement; and (ii) employers having 500 or more employees, who establishes an approved gratuity fund in the manner prescribed.
Employer to register his establishment with the controlling authority: For the purposes of this Section, every employer shall within a prescribed time get his establishment registered with the controlling authority in the prescribed manner, and only those employers who have taken an insurance as referred above or has established an approved gratuity fund shall be registered.
Appropriate government may make rules: To give effect to the provisions of this Section the appropriate government may make rules provided for the composition of Board of Trustees of the approved gratuity fund, and for the recovery by the controlling authority of the amount of gratuity payable to employees of LIC or any other insurer with whom an insurance has been taken, or as the case may be, the Board of Trustees of the approved gratuity fund.
Employers failure to pay premium/ contribute to the gratuity fund: If the employer fails to pay the premium to the insurance or to contribute to an approved gratuity fund, he shall be liable to pay them a amount of gratuity including interest, if any, for delayed payments, to the controlling authority.
Penalty: Its contravention is punishable with a fine upto ` 10000/- and in the case of a continuing offence with a further fine which may extend to ` 1000/- per day upto the duration the offence continues.