Section 2 of the Payment of Gratuity Act, 1972 - Definitions
Section 2 contained the principal definitions used throughout the Payment of Gratuity Act, 1972. These definitions explained expressions such as appropriate Government, employee, employer, family, retirement, superannuation and wages.
Current legal position: The Code on Social Security, 2020 was brought into force from 21 November 2025. Section 164 of that Code repeals the Payment of Gratuity Act, 1972, subject to the repeal and savings provisions in the Code. Accordingly, Section 2 reproduced and explained below remains important for historical matters, saved actions, earlier periods and interpretation of rights arising under the repealed Act. Current gratuity matters should also be examined under Chapter V and the applicable definitions of the Code on Social Security, 2020.
Meaning and purpose of Section 2
The opening words of Section 2 provided that the listed expressions would have the stated meanings unless the context otherwise required. The definitions determined the scope of the Act, the persons covered, the responsible employer, the competent Government and the wage components relevant to gratuity.
Definitions under Section 2
(a) Appropriate Government: In relation to an establishment belonging to or under the control of the Central Government, an establishment having branches in more than one State, a factory belonging to or under Central Government control, or a major port, mine, oilfield or railway company, the appropriate Government was the Central Government. In other cases it was the State Government.
(b) Completed year of service: Continuous service for one year.
(c) Continuous service: Continuous service as defined in
Section 2A.
(d) Controlling authority: An authority appointed by the appropriate Government under
Section 3.
(e) Employee: A person, other than an apprentice, employed for wages on express or implied terms in any kind of work, manual or otherwise, in or in connection with a factory, mine, oilfield, plantation, port, railway company, shop or other establishment to which the Act applied. A person holding a post under the Central or a State Government and governed by another Act or rules providing for gratuity was excluded.
(f) Employer: The person or authority having supervision and control of employees in a Government-controlled establishment, the corresponding person in a local authority, or, in other cases, the person or authority having ultimate control over the affairs of the establishment. Where those affairs were entrusted to a manager, managing director or another person, that person fell within the definition.
(g) Factory: The expression had the meaning assigned to it by the legislation referred to in the Act.
(h) Family: The Act specified the employee, spouse, children, dependent parents and specified family members, with rules concerning lawful adoption. The precise statutory definition should be consulted for claims involving nomination or succession.
(i) Major port: The expression was linked to the statutory definition referred to in the Act.
(j) Mine: The expression was linked to the statutory definition referred to in the Act.
(k) Notification: A notification published in the Official Gazette.
(l) Oilfield: The expression was linked to the statutory definition referred to in the Act.
(m) Plantation: The expression was linked to the statutory definition referred to in the Act.
(n) Port: The expression was linked to the statutory definition referred to in the Act.
(o) Prescribed: Prescribed by rules made under the Act.
(p) Railway company: The expression had the meaning assigned to it by the railway legislation referred to in the Act.
(q) Retirement: Termination of the service of an employee otherwise than on superannuation.
(r) Superannuation: Attainment by an employee of the age fixed in the contract or conditions of service as the age on attaining which the employee must vacate employment.
(s) Wages: Emoluments earned by an employee while on duty or on leave in accordance with the terms and conditions of employment and paid or payable in cash, including dearness allowance. The definition excluded bonus, commission, house rent allowance, overtime wages and other allowances.
Section 2 and the Code on Social Security, 2020
The Code on Social Security, 2020 now provides the governing statutory framework for gratuity. Its general definitions are in Section 2, while gratuity is dealt with in Chapter V, including Section 53. The Code also contains its own definition of wages in Section 2(88), which is relevant to gratuity calculation under the current framework.
Section 164 of the Code repeals the Payment of Gratuity Act, 1972. Its savings provisions preserve qualifying actions, rules, notifications, benefits, orders and other matters to the extent provided by the Code. For a claim spanning periods before and after 21 November 2025, the commencement provisions, repeal and savings clause and applicable rules should therefore be checked carefully.
Why the old Section 2 remains relevant
Although the 1972 Act has been repealed, its definitions may remain material when examining liabilities, benefits, proceedings or actions attributable to the period when that Act governed the matter, and where the savings provisions protect the relevant legal consequence. The applicable law depends on the date and nature of the right, liability, proceeding or action involved.
