Is My IT Company Required to Pay Gratuity? Understanding Eligibility Under the Shop and Establishment Act

Gratuity Payment Eligibility for IT Companies

I work for an IT company (SME Level), and I am the only employee who has completed 6 years of service. One day, I was having a policy discussion with my HR Head, and I suggested starting a trust or some savings for gratuity compensation for employees. However, he denied it, saying we don't have to pay gratuity to employees and that we are not covered under it, as gratuity is payable only by companies coming under the Factories Act.

I would like to know, is it true? What is the eligibility criteria for a company covered under the Shop and Establishment Act?

Thanks & regards,
Supriya

If your company has more than 10 employees, the Gratuity Act is applicable to your company. It does not have any relation to the Factories Act or the Shop and Establishment Act. Being an IT company, you are covered under the Shop Act. Please ask your HR to read the Gratuity Act carefully as it is applicable to IT industries.

Regards,

Thank you very much for your reply. I will be completing 6 years on June 14 in my current company. My company does not have any savings or account to pay gratuity to the employees. In case I leave this company, can I get gratuity? If they deny, what steps can I take?

Awaiting your prompt reply.

Thanks & Regards,
Supriya

I would like you to read the preamble of the Payment of Gratuity Act, 1972. It clearly states that the Act provides a scheme for the payment of gratuity to employees engaged in factories, mines, oil-fields, plantations, ports, railway companies, shops, or other establishments. Section 1(3)(c) of the Act empowers the Central Government to extend its application to any other establishment by means of notification. Therefore, as rightly said by Mr. Malik, the Act is applicable to your company, and all the employees, irrespective of their status, are entitled to gratuity on the termination of their employment subject to the conditions stipulated therein.

In order to ensure its prompt payment, your management may opt for any Group Gratuity Insurance Scheme offered by insurance companies. The Act is a complete code in respect of gratuity, and in case of its denial by the employer, ample legal provisions are there for its recovery.

Regards