Sections 57 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 57 requires an employer to cover his gratuity liability by insurance with an IRDAI-regulated insurer, or by an approved gratuity fund, from a date the appropriate Government notifies. Section 58 lets the appropriate Government appoint the "competent authority" who implements Chapter V (Gratuity).
From a date notified by the appropriate Government, every employer other than the Central or State Government (or an establishment under their control) must obtain insurance for gratuity liability from an insurer regulated by the Insurance Regulatory and Development Authority (s.57(1)). An employer who already has an approved gratuity fund and wants to continue it, and every employer of five hundred or more persons who establishes one, can be exempted (s.57(2)). Registration with the competent authority depends on holding the insurance or the fund (s.57(3)). If premium or contribution is not paid, the employer is liable to pay the gratuity due, with interest for delay, forthwith to the competent authority (s.57(5)).
Why this section matters to payroll and finance teams
Sections 53 to 56 decide whether and how much gratuity is payable. Section 57 decides who stands behind the payment. Under the old Payment of Gratuity Act, 1972 the same idea appeared in "Section 4A" (see our post on compulsory insurance for gratuity); the Code restates it in its own words and adds the registration link in sub-section (3). A finance team that books a gratuity provision but has no insurance or fund may find itself unable to register under this section once the date is notified. A payroll compliance audit can test whether provisions, policies and funds line up with headcount.
Section 57(1): insurance for gratuity liability
The obligation is conditional on a notification: it applies "with effect from such date as may be notified by the appropriate Government". The proviso lets the Government appoint different dates for different establishments, classes of establishments or areas. So the obligation can be phased in. We have not assumed a date; check the notification applicable to your establishment and State.
Key points from the text:
- Who is bound: every employer, except one belonging to, or under the control of, the Central Government or a State Government.
- What he must do: obtain insurance "in the manner prescribed by the Central Government" for his liability for gratuity under Chapter V.
- From whom: an insurance company regulated by the Authority defined in section 2(1)(b) of the Insurance Regulatory and Development Authority Act, 1999.
- Subject to sub-section (2): the approved-fund route is the exception.
Section 57(2): approved gratuity fund route
The appropriate Government may, subject to conditions prescribed by the Central Government, exempt from sub-section (1):
- any employer who had already established an approved gratuity fund for his employees and wants to continue it; and
- every employer employing five hundred or more persons who establishes an approved gratuity fund in the prescribed manner.
The Explanation gives "approved gratuity fund" the same meaning as in section 2(5) of the Income-tax Act, 1961. For the tax side, see our posts on the gratuity fund rules under the Income-tax Rules, for example Rule 316 and Rule 317 of the Income-tax Rules 2026.
Section 57(3) and (4): registration and recovery
Sub-section (3) asks every employer, within the time the Central Government prescribes, to get his establishment registered with the competent authority in the manner the appropriate Government prescribes. The same sub-section bars registration unless the employer has taken the insurance under (1) or established the approved fund under (2).
Sub-section (4) lets the appropriate Government provide for the composition of the Board of Trustees of an approved fund, and for recovery by the competent authority of the gratuity payable to an employee from the insurer (or from the Board of Trustees), in the prescribed manner.
Section 57(5): the consequence of not paying premium
If the employer fails to pay a premium under the insurance, or a contribution to the approved fund, he is liable to pay the gratuity due under Chapter V, including interest, if any, for delayed payments, forthwith to the competent authority. The statute does not leave the employee waiting for the insurer. In practice this means a lapsed policy converts the liability into a direct, immediate payment.
| Provision | What it says | Who acts |
|---|---|---|
| s.57(1) | Obtain gratuity insurance from an IRDAI-regulated insurer, from a notified date | Employer (non-Government) |
| s.57(1) proviso | Different dates for establishments, classes or areas | Appropriate Government |
| s.57(2) | Exemption for existing approved funds and for employers of 500 or more who set up one | Appropriate Government, on prescribed conditions |
| s.57(3) | Register with the competent authority; no registration without insurance or fund | Employer |
| s.57(4) | Board of Trustees; recovery from insurer or fund via the competent authority | Appropriate Government / competent authority |
| s.57(5) | Premium or contribution default: employer pays gratuity plus interest forthwith | Employer |
Section 58: the competent authority
Section 58(1) lets the appropriate Government, by notification, appoint any officer of that Government having the prescribed qualifications and experience as a competent authority for implementing any provision of Chapter V in a specified area. Where more than one competent authority covers an area, the Government may regulate the distribution of business by general or special order (s.58(2)). Under s.58(3), a competent authority deciding a matter may choose one or more persons with special knowledge to assist in the inquiry.
For the Central sphere, rule 34 of the Code on Social Security (Central) Rules, 2026 says the competent authority is appointed by the Central Government, by notification, from its gazetted officers having experience in labour matters. The Central Rules apply where the Central Government is the appropriate Government; where the State Government is, the State's own rules apply. The Central Rules also set out how a gratuity application and appeal run before the competent authority (rule 33); see our article on sections 55 and 56.
A worked example
A manufacturing company employs 620 persons and has run a trust-based gratuity fund for years. Once the appropriate Government notifies the date and conditions, it can ask to continue the arrangement under s.57(2), as an employer with an existing approved fund. A trading firm with 40 staff, which has only a book provision, would fall under sub-section (1) and need an insurance cover. If either stops paying into its fund or policy, s.57(5) makes it pay the due gratuity and interest directly to the competent authority. (The figures are illustrative.)
Need help with gratuity funding and records?
Choosing between an insurer and an approved fund, and keeping provisions, premiums and headcount consistent, is a finance and compliance decision. If you would like your gratuity arrangements reviewed against these sections before the notified date applies to you, our payroll compliance audit team can help.
Key takeaways
- Gratuity insurance becomes compulsory from a date notified by the appropriate Government, which may differ by establishment, class or area.
- The Central or State Government and establishments under their control are outside s.57(1).
- Approved gratuity funds can be exempted: existing funds, and new funds of employers with 500 or more persons.
- No registration with the competent authority without insurance or an approved fund.
- If premium or contribution is not paid, the employer owes the gratuity, with interest for delay, forthwith to the competent authority.
- The competent authority is appointed under s.58; in the Central sphere, rule 34 of the Central Rules says from gazetted officers with labour experience.
Read next
- Sections 55 and 56: Nomination and determination of gratuity
- Sections 59 and 60: Employment of women and right to maternity benefit
- Gratuity under the new Labour Codes
- Gratuity compliance checklist for employers
Disclaimer: Based on the Code on Social Security, 2020 (as enacted) and, where noted, the Code on Social Security (Central) Rules, 2026 (G.S.R. 344(E), 8 May 2026), as on 30 September 2026. The Code is in force from 21 November 2025; some provisions may be notified later, and State Governments make their own rules for establishments where the State is the appropriate Government. Verify the current position before acting.