Gratuity Rules explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Chapter IV of the Social Security (Bihar) Rules, 2026 (rules 7 to 10) sets out the gratuity process for an employer in Bihar: how an employee nominates, when the application is made, what the employer must send back and by when, how the competent authority decides a dispute, how appeals and recovery work, and who the competent authority is. This article follows the sequence an HR head will actually follow.
The rules are the Social Security (Bihar) Rules, 2026, as notified on 30 June 2026 and published in the Bihar Gazette (Extraordinary) No. Patna 697 of 1 July 2026. Rule 1(3) says they come into force from the date of its publication in official gazette. The employer must determine the gratuity and give written notice as soon as it becomes payable, even without an application (rule 8(1)(vii)). On an application the employer issues a notice within fifteen days, fixing payment not later than the thirtieth day after receipt (rule 8(2)). A claimant may go to the competent authority within one hundred eighty days (rule 8(4)).
Later amendments and State notifications under these rules should be checked in the State Gazette. A payroll compliance audit can check whether an employer's gratuity process follows these steps.
Nomination (rule 7)
A nomination is made in Form IV, in duplicate, delivered personally against receipt, by registered post acknowledgement due, or electronically (rule 7(2)(1)). The time is:
| Employee | Time as printed |
|---|---|
| Already employed for a year or more on commencement of the rules, with no nomination submitted | Ordinarily within ninety days from that date |
| Completes one year of service after commencement | Ordinarily within thirty days of completing one year |
A nomination accepted after the period is not invalid merely because it was late. Within thirty days of receipt, the employer verifies the service particulars with the establishment's records and returns the duplicate, attested by the employer or an authorised officer, after obtaining a receipt, keeping the other copy. An employee with no family at the time of nominating submits a fresh nomination in Form V within ninety days of acquiring a family. A notice of modification, including when a nominee predeceases the employee, is in Form VI. A nomination, fresh nomination or modification is signed by the employee (thumb impression with witness signatures if illiterate), and takes effect from the date the employer receives it.
For a minor nominee or heir, the competent authority invests the gratuity deposited by the employer in a term deposit with the State Bank of India or any nationalised bank (rule 7(1)). The Central companion posts are rules 31 and 32 of the Central Rules, gratuity for minors and nomination.
The application and the employer's duty (rule 8(1) to (3))
| Step | Rule | As printed |
|---|---|---|
| Employee's application | 8(1)(i) | Form VII to the employer, ordinarily within thirty days from the date the gratuity became payable; where the retirement date is known, the employee may apply before sixty days of that date |
| Fixed-term employee | 8(1)(i) proviso | Eligible if service under the contract is at least one year; a further period above six months but below one year rounds up to one additional year |
| Nominee | 8(1)(ii) | Form VII, ordinarily within thirty days; a plain-paper application with relevant particulars is also accepted |
| Legal heir | 8(1)(iii) | Form VII, ordinarily within one year |
| Late application | 8(1)(v) | Entertained on sufficient cause for delay; no claim is invalid merely because it was late; a dispute goes to the competent authority |
| Employer's own duty | 8(1)(vii) | As soon as gratuity becomes payable, whether or not an application is made, the employer determines the amount and gives written notice to the person and the Controlling Authority, specifying the amount |
| Notice on an application | 8(2)(i) | Within fifteen days of receipt: if admissible, a notice in Form VIII specifying the amount and a payment date not later than the thirtieth day after receiving the application; if not admissible, a notice with reasons, copy to the competent authority |
| Witnesses | 8(2)(iii) | For a nominee or heir, the employer may ask for evidence of identity or claim, and the notice period runs from when it is furnished |
| Mode of payment | 8(3) | By Demand Draft or credit to the bank account of the eligible person |
The rule says the notice of rejection is "in Form-VI", while Form VIII is headed "Notice for Payment/Rejecting claim of Gratuity"; an employer should use the Form headed for the purpose and check the Gazette for any correction. Where gratuity became payable before commencement of the rules, the periods run from commencement (rule 8(1)(iv)). The Central rules are explained in our post on rule 33 of the Central Rules, application for gratuity and appeal.
Dispute before the competent authority (rule 8(4) to (11))
A claimant may, within one hundred eighty days of the cause, apply in Form IX to the competent authority for a direction, where the employer (a) refuses a nomination or an application, (b) issues a notice specifying a lower amount or rejects eligibility, or (c) fails to issue the notice in time. The authority may accept a late application on sufficient cause. The authority issues a notice in Form X calling both sides; may proceed ex parte against an employer who does not appear, or dismiss for the applicant's absence, with review possible on good cause shown within thirty days and rehearing after not less than fourteen days' notice. The authority shall dispose of the application within six months of receipt (rule 8(5)(vi)).
If the claimant is found entitled, the authority issues a notice in Form XI to the employer, directing payment within thirty days from receipt of the notice (rule 8(11)).
Appeal and recovery (rule 8(12) and (13))
| Step | As printed |
|---|---|
| Appeal | Memorandum to the Labour Commissioner-cum-appellate authority, with a copy to the opposite party and the competent authority, in person, by registered post or electronically; it states the facts, the decision, the grounds and the relief, with a certified copy of the finding |
| Opposite party | Comments within fourteen days of receiving the copy |
| Disposal | Not to exceed 90 days from filing; a maximum of three opportunities for a non-appearing party |
| After appeal | The competent authority modifies the direction if required and issues a Form XI notice for payment within fifteen days of receipt |
| Recovery | The claimant applies in duplicate in Form XII for recovery under section 129 of the Code, if the employer fails to pay |
Registration, trustees and the competent authority (rules 9 and 10)
The Labour Resources and Migrant Workers Welfare Department notifies the manner of registration of an establishment under section 57(3) and the composition of the Board of Trustees of an approved gratuity fund; registration is done electronically in Form XIII. Any amount directed to be paid is recoverable as an arrear of land revenue (rule 9(4)). The competent authority under section 58(1) is the Deputy Labour Commissioner having at least one year of work experience as Assistant Labour Commissioner, within his jurisdiction (rule 10).
A worked example
Sone Valley Tiles Pvt Ltd, Dehri-on-Sone, has an employee retiring in a few months. The employee applies in Form VII more than sixty days before retirement. The company verifies the claim, issues a Form VIII notice within fifteen days, fixing a payment date within thirty days of receipt, and pays by bank credit. Had it not issued the notice, the employee could apply in Form IX within one hundred eighty days; the competent authority would hear both sides and decide within six months. The company would then pay within thirty days of a Form XI notice, or file an appeal within the appeal procedure.
Need help with gratuity compliance in Bihar?
Missing the fifteen-day notice or the thirty-day payment date turns a routine retirement into a dispute. Our payroll compliance audit service can map your gratuity workflow to rules 7 and 8, with a dated checklist for each step.
Key takeaways
- Nomination is in Form IV, with Forms V and VI for fresh nomination and modification (rule 7).
- The employer determines gratuity and gives written notice as soon as it becomes payable (rule 8(1)(vii)).
- A Form VIII notice follows within fifteen days of an application, with payment by the thirtieth day (rule 8(2)).
- The claimant may apply to the competent authority within one hundred eighty days; disposal within six months (rule 8(4) and (5)).
- Appeal disposal must not exceed 90 days; recovery is by Form XII (rule 8(12) and (13)).
Read next
- Social Security (Bihar) Rules, 2026: the notification and the unorganised and building workers Boards
- Social Security (Bihar) Rules, 2026: maternity benefit, employee's compensation and the Employees Insurance Court
- Rule 33 of the Central Rules: application for gratuity and appeal
Disclaimer: Based on the State or Union territory rules named above, as notified under the Labour Codes and consulted on 4 October 2026. Later amendments, State notifications, fees and forms should be checked in the State Gazette and on the State labour department website. This article is general information, not legal advice; check the official text before acting.