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Gratuity Applicability

Gratuity Applicability

What is gratuity applicability?

Gratuity is lump sum payment made by an employer to an employee in consideration of his past service when the employment is terminated. It is paid for long and meritorious services rendered by an employee. With enactment of Payment of Gratuity Act, 1972, gratuity payment has become mandatory and in case of non application of gratuity Act, the employee can claim gratuity under terms of contract of employment.

When and who’ll eligible for Gratuity?

Applicability of Payment of Gratuity Act: – Application depends on two criteria.

1) he should be employed in an establishment to which the act applies and

2) he is an employee as defined in section 2 (e)

Establishments to which the Payment of Gratuity Act applies: – Section 1(3) applies to

  1. Employees engaged in factories, mines, oilfields, plantations, ports, railway companies,
  2. Every shop or establishment within meaning of any law for the time being in force in relation to shops and establishments in a State, in which ten or more persons are employed, or were employed, on any day of the preceding twelve months;
  3. Such other establishments or class of establishments, in which ten or more employees are employed, or were employed, on any day of the preceding twelve months, as the Central Government may, by notification, specify in this behalf.

Central government notification: – Central government by virtue of clause (c) has specified Motor transport undertakings, Clubs, chambers of commerce and industry, Institutions, societies, Trusts and circus industry in which 10 or more persons are employed or were employed on any day of the preceding 12 months, as classes of establishments to which the Act shall apply.

Applicable once, continuous to be governed by PGA 1972:- It is applicable even after the number of persons employed has fallen below ten.


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