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Registration of Establishment & Payment of Gratuity Under Andhra Pradesh Compulsory Gratuity Insurance Rules, 2011

Background

  • The Payment of Gratuity Act, 1972, is an act to provide for a scheme for the payment of gratuity to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments and for matters connected therewith or incidental thereto.
  • To operationalize this provision, the state of Andhra Pradesh has notified the Andhra Pradesh Compulsory Gratuity Insurance Rules, 2011 (APCGI), making it mandatory for employers (excluding central or state government-owned establishments) to secure their gratuity liability through an insurance policy or approved gratuity fund. It mandates to get insured through Life Insurance Corporation established under the Life Insurance Corporation of India Act, 1956 [Read with section 4A (1)]
  • The appropriate Government may, subject to such conditions as may be prescribed, exempt every employer who had already established an approved gratuity fund in respect of his employees and who desires to continue such arrangement and every employer employing five hundred or more persons who establishes an approved gratuity fund in the manner prescribed from these provisions. [Read with section 4A (2)]

Required Compliances in the State of Andhra Pradesh for Gratuity Insurance

Registration of Establishment

  • For the purpose of effectively implementing the provisions of this section, every employer shall within such time as may be prescribed get his establishment registered with the controlling authority in the prescribed manner and no employer shall be registered under the provisions of this section unless he has taken an insurance referred to in sub-section (1) or has established an approved gratuity fund referred to in sub-section (2) [Section 4A (3)]

Note: Every factory, mine, oilfield, plantation, port, Railway Company, every shop or establishment where 10 or more persons are employed or were employed on any day during the preceding 12 months and any other establishment Central Govt. may, by notification, specify registration at pre-operation stage.

  • Every employer of an establishment covered under the Act, who had already established an Approved Gratuity Fund in respect of his employees and who desires to continue such arrangement, and every employer employing 500 or more persons who establishes an Approved Gratuity Fund in accordance with sub-section (5) of section 2 of the Income Tax Act, 1961 may opt to continue / adopt such arrangement by submitting an option in Form-II, provided such existing Approved Gratuity Fund covers the entire liability of all the employees of the establishment, under the Act [Rule 5]

Information to be furnished in Form III

  • In the State of Andhra Pradesh as per Rule 4 of the APCGI Rules, 2011 every employer of an establishment covered by the Act shall get his establishment registered with the Controlling Authority of the area in Form-I, within 30 days from the notification of the compulsory insurance provided under section 4A of the Act, along with details of employees of the establishment, to be furnished in Form-III.
  • Every employer shall furnish the details of the employees insured, to the controlling authority in Form-III at the time of registration of the establishment with the controlling authority and thereafter whenever there is a change in the employees insured.

Obtaining Insurance for Payment of Gratuity

  • The appropriate Government may, by notification, make rules to give effect to the provisions of this section and such rules may provide for the composition of the Board of Trustees of the approved gratuity fund and for the recovery by the controlling authority of the amount of the gratuity payable to an employee from the Life Insurance Corporation of India or any other insurer with whom an insurance has been taken under sub-section (1), or as the case may be, the Board of Trustees of the approved gratuity fund [Section 4A (4)]
  • Every employer other than an employer of an establishment belonging to, or under the control of, the Central Government or a State Government, shall subject to provisions of sub section (2) under section 4A of the Act, obtain an insurance in the manner prescribed under sub-section (4) of section 4A of the Act for his liability for payment towards the gratuity under this Act, from the Life Insurance Corporation of India or any other Insurance Company incorporated under the Company’s Act, 1950.

Penalties for Non-Compliance

As per Section 9(2) of the Payment of Gratuity Act, 1972

  • An employer who contravenes, or makes default in complying with, any of the provisions of this Act or any rule or order made there under shall be punishable with imprisonment for a term which shall not be less than three months but which may extend to one year, or with fine which shall not be less than ten thousand rupees but which may extend to twenty thousand rupees, or with both.

Where the offence relates to non-payment of any gratuity payable under this Act, the employer shall be punishable with imprisonment for a term which shall not be less than Six months but which may extend to two years unless the court trying the offence, for reasons to be recorded by it in writing, is of opinion that a lesser term of imprisonment or the imposition of a fine would meet the ends of justice.

Disclaimer: The information contained in this Article is intended solely for personal non-commercial use of the user who accepts full responsibility of its use. The information in the article is general in nature and should not be considered to be legal, tax, accounting, consulting or any other professional advice. We make no representation or warranty of any kind, express or implied regarding the accuracy, adequacy, reliability or completeness of any information on our page/article. 

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Schedule A Demo