Gratuity Act

Topics: Employment, Termination of employment, Death Pages: 5 (1096 words) Published: February 19, 2011
Payment of Gratuity

The Payment of Gratuity Act 1972 is a social security enactment. It is derived from the word ‘gratuitous’, which means ‘gift’ or ‘present’. However, having being enacted as a social security form, it ceases to retain the concept of a gift but it has to be seen as a social obligation by an employer towards his employee.


The Payment of Gratuity Act 1972 applies to the whole of India but it does not apply to the State of Jammu and Kashmir. It applies to employees employed in:

(a) Every factory, mine, oilfield, plantation, port and Railway Company. (b) Every shop or establishment in which 10 or more persons are or were employed on any day in the preceding 12 months. (c) Such other establishments or class of establishment, in which 10 or more employees are or were employed on any day in the preceding 12 months, as the Central Government may notify in this behalf.

Any shop or establishment shall continue to be governed by the Act even if the no. of its employees comes below 10 persons at any time in the future.

Applicability to NGOs

Public charitable and religious trusts are also covered by this Act, provided that they are shops or establishments within the meaning of the Shops and Establishment Act applicable to their area of operation and that 10 or persons have been employed by them on any day in the preceding 12 months.


1. Continuous Service:

For the purposes of this Act, -
An employee shall be said to be in continuous service for a period if he has, for that period, been in uninterrupted service, including service which may be interrupted on account of sickness, accident, leave, absence from duty without leave, lay off, strike or a lock-out or cessation of work not due to any fault of the employee, whether such uninterrupted or interrupted service was rendered before or after the commencement of this Act.

(a) for the said period of one year, if the employee during the period of twelve calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than i) one hundred and ninety days, in the case of an employee employed below the ground in a mine or in an establishment which works for less than six days in a week; and

(ii) two hundred and forty days, in any other case.

2. Family:

“Family”, in relation to an employee, shall be deemed to consist of— i) In the case of a male employee, himself, his wife, his children, whether married or unmarried, his dependent parents and the widow and children, of his predeceased son, if any, (ii) In the case of a female employee, herself, her husband, her children, whether married or unmarried, her dependent parents and the dependent parents of her husband and the widow and children of her predeceased son, if any:

3. Appropriate government:

Means (i) in relation to an establishment–
(a) Belonging to, or under the control of, the Central Government, (b) Having branches in more than one State,
(c) Of a factory belonging to, or under the control of, the Central Government, (d) Of a major port, mine, oilfield or railway company, the Central Government,

(ii) in any other case, the state government

4. Employee

Employee means anyone person except for apprentice employed on wages in any establishment, factory, mine, plantation, port, railway company or shop to do any skilled, semi-skilled or unskilled manual, supervisory, technical or clerical work.

6. Controlling authority
The appropriate Government may, by notification, appoint any officer to be a controlling authority, who shall be responsible for the administration of this Act and different controlling authorities may be appointed for different areas.

Payment of Gratuity

Gratuity shall be paid to an employee on the termination of his employment after s/he has rendered continuous service of not less than 5 years i.e. on superannuation, retirement, resignation,...
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