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Divya Gupta   07 March 2023

Gratuity for fixed term employees

Hi , If an employee is hired on 1 year fixed term contract and gratuity is built in his salary break up structure then we should pay gratuity after 4.8 years as per Payment of Gratuity act or whenever he leaves.


 3 Replies

Dr J C Vashista (Advocate)     08 March 2023

Section 1 of the Payment of Gratuity Act, 1972 defines applicability of this Act as:

(1) xxxxx

(2) XXXXX:

(3) It shall apply to-

(a) every factory, mine, oilfield, plantation, port and railway company;

(b) every shop or establishment within the meaning of any law for the time being in force in relation to shops and establishments in a State, in which ten or more persons are employed, or were employed, on any day of the preceding twelve months;

(c) such other establishments or class of establishments, in which ten or more employees are employed, or were employed, on any day of the preceding twelve months, as the Central Government may, by notification, specify in this behalf.

(3-A) A shop or establishment to which this Act has become applicable shall continue to be governed by this Act, notwithstanding that the number of persons employed therein at any time after it has become so applicable falls below ten.

(4) xxxxxxxxxx-

Sudhir Kumar, Advocate (Advocate)     08 March 2023

section 3(e)


(e) “employee” means any person (other than an apprentice) who is employed for wages,
whether the terms of such employment are express or implied, in any kind of work, manual or
otherwise, in or in connection with the work of a factory, mine, oilfield, plantation, port, railway
company, shop or other establishment to which this Act applies, but does not include any such
person who holds a post under the Central Government or a State Government and is governed
by any other Act or by any rules providing for payment of gratuity

Divya Gupta   09 March 2023

Thanks it means employer does not hold liability to pay gratuity to short term for fixed duration employees as they will never stay with Company  for 4 years or so as precribed under payments of Gratuity act. But we can keep the components in  CTC to tell them if they stay for above duration they will be entitled( in actual they will never get ).

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