Gratuity Eligibility in Small Companies: Can My Friend Claim It After 10 Years?

I have a friend who has been working with a private limited company employing fewer than 10 employees for the last 10 years. Since the Gratuity Act specifies a minimum employment of ten people for eligibility for gratuity payment, will my friend and his colleagues be eligible for gratuity payment? I would appreciate your insights on this.

Regards

The act is applicable only if there are more than 10 employees; hence, your friend is not eligible for payment of gratuity.

Dear Arjunsingh,

It is correct that the Payment of Gratuity Act is not applicable to the company of your friends as the company's strength is less than 10. Hence, it is immaterial to think about the payment of gratuity even if services for life have been spent.

KIRAN KALE

Hello, sir. The Payment of Gratuity Act, 1972, is only applicable to industries where more than 10 persons are employed. In this particular case, I do not think your friend is entitled to gratuity payment.

Eligibility for Gratuity in Private Limited Companies

You have not indicated whether the private limited company in which your friend is working is a factory, a mine, an oil field, a plantation, or a shop or establishment. If the private limited company is a factory, mine, or plantation, the restriction of employing 10 persons does not apply. It must meet the definitions under the Factories Act, Mines Act, or Plantation Labour Act. If the company is not one of these, then it must be a shop or establishment, requiring employment of ten or more persons for the Gratuity Act to be applicable. Once ten or more persons are employed, the Gratuity Act applies, regardless of the employee count dropping below ten.

In the case that the private limited company is a shop or establishment, please verify if at any point ten or more persons were employed. If so, the Gratuity Act applies, entitling your friend to gratuity.

Regards,
V. Harikrishnan
Joint Commissioner of Labour (Retired)
Government of Tamilnadu
Labour Law Consultant
Chennai

Thank you very much for your inputs. The firm to which I am referring falls under the Shops & Establishment Act, and I will check the provisions therein. Additionally, as suggested, I will review the relevant details to determine whether the firm has ever employed 10 people in the past.

Thanks again for your inputs.

Regards,
Arjun

Anyone can explain if employees who are casual or factory workers are also covered for gratuity eligibility? For example, if someone joins as a factory casual worker and after 5 years becomes a company employee, then leaves the organization after 10 years, what will be considered as the date of joining? Will it be the date of joining as a factory casual worker or the date of joining as a company employee?

Dear HR,

Our company started in 2012 with a minimum number of workers at that time. The factory license was applied for in February 2015. Now, my question is whether the workers are eligible for gratuity or not. Please advise me.

Thank you.