Are Company Directors and Partners Entitled to Gratuity? Let's Discuss!

Dear all,

I have a query where I need to know the following: Whether the Managing Director, Director, and partners of the company are entitled to Gratuity?

Please reply to the above.

Regards,
Mahesh Patel

They are entitled to get gratuity provided they have been on muster rolls of the company and have been receiving a salary (NOT FEES) for the last 5 years.

Regards,
Madhu.T.K

Dear Madhu T.K.,

Thank you for your response.

I received the answer through LLR.

The definition of 'Employee' under section 2(e) of the Payment of Gratuity Act, 1972 does not specify whether a director is considered an employee. It depends on the functions or duties performed by the director. It is clarified that if a company's director is actively involved in duties and working for the company, then they fall under the definition of an 'employee' according to the act.

However, a question arises if the individual is a director for more than one company.

Mahesh Patel

Mahesh,

It is certainly the duties and responsibilities that decide, but one more thing is that gratuity is calculated on salary and not on any fees or share of profit. If a person is employed as a director in more than one company, he will get gratuity from each company upon leaving each of the companies after 5 years of continuous service.

Regards,

Madhu.T.K