Applicablility of gratuity act 1972

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Friyana

Audit Assistant

35 Points Joined September 2010

As per the Gratuity Act, one of the criterias mentioned for its applicability is "Every shop or establishment to which Shop and Establishment Act of a State applies in which 10 or more persons are employed on any day of the preceding 12 months"

My question is if a Pvt. Ltd. Company has 4 divisions across the country do we consider each division for determining the no. of persons employed or we consider the whole company in totality?

For eg: 1 division has 12 employees and another 8. Do we consider total 20 employees or consider each division separately thereby the first division being covered under the Act and not the second.

Replies (2)

CA.Vinita Gupta

Deputy Manager- Finance

2923 Points Joined March 2010

The Company as a whole is considered for the purpose of Calculating the no. of employees

P C Agrawal

Registered independent director Past Ch

8229 Points Joined March 2007

Gratuity is payable to an 'employee' after completion of 5 years continuous service. 'Employee' has been defined in Sec.2(e) as a person employed in any establishment, factory, mine etc. As per Sec.1(3) it applies to every factory, shop, establishment in which 10 or more persons are employed.....

Hence the number of employees is not be consolidated at company level. Returns are to be filed with Appropriate Government, which in case of a company could involve various State Governments. In such cases there is no mechanism for consolidation of data at the company level.