Payment of Gratuity Act, 1952 Scope and Application, Definition

Payment of Gratuity Act, 1952 is a pivotal legislation enacted by the Indian Parliament to provide a social security benefit to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops, or other establishments. The Act mandates the payment of gratuity, a lump-sum amount, to employees as a gesture of gratitude for their service upon retirement, resignation, death, disablement, or termination, provided the employee has completed a minimum of five years of continuous service, except in cases of death or disablement where this condition is waived. The amount of gratuity payable is calculated based on the employee’s last drawn salary and the total number of years of service, subject to a cap prescribed by the government. The Act safeguards employees’ rights to a secure post-retirement life and acknowledges their contribution to the growth and success of the organization.

Payment of Gratuity Act, 1952 Scope:

• Establishments:

It applies to factories, mines, oilfields, plantations, ports, railway companies, shops or establishments within the meaning of any law for the time being in force in relation to shops and establishments in a state, and such other establishments as the Central Government may notify.

• Employees:

The Act covers any person (other than an apprentice) employed on wages, in any of the above establishments, to do any skilled, semi-skilled, or unskilled, manual, supervisory, managerial, administrative, technical, or clerical work, whether the terms of such employment are express or implied.

Payment of Gratuity Act, 1952 Application:

• Eligibility for Gratuity:

The Act applies to employees who have been in continuous service for not less than five years, except in cases of death or disablement. For seasonal establishments, the Act provides a different criterion for calculating continuous service.

• Nationwide Application:

While it is a Central Act, it applies to all parts of India and extends to specific categories of employees across various sectors.

• Applicability Threshold:

Initially, the Act applied to establishments employing ten or more persons. However, the threshold or applicability criteria can be modified by the Central Government through notifications.

• Exemptions and Extensions:

The Central Government holds the authority to exempt any establishment, employee, or class of employees from the Act’s provisions or extend the Act to any class of establishments.

Key Features

• Gratuity Calculation:

The gratuity amount is calculated based on the employee’s last drawn salary and the total years of service, capped at an amount prescribed by the government.

• Protection and Recovery:

The Act not only secures the right to gratuity for employees but also provides mechanisms for the protection and recovery of gratuity amounts. It prescribes penalties for employers who fail to comply with their obligations under the Act.