Industrial Relations And Labour Laws
Harsh Kumar Mehta
Consultant In Labour Laws/hr
In Hr Job
Rajeev Verma
Hr Professional
+5 Others

friends can any one give me the following queries explanation
1) If a employee has joined in Nov. 00 and he has left the job in July 05 if i calculate his entire period of service it comes to 4 yrs. and 9 months
Query : he this employee eligible for Gratuity ?
In the increment letter company had mentioned that after 4 yrs of his service he is eligible for 30 days gratuity,
Query : Do i have to give the 30 days or as per the act i can give only on 15 days ?
if i have to give on 30 days then do i have to considered earlier 4 yrs also in 30 days ?
The employee is in staff cadre and we are paying monthly salary for 30 days
Query : at the time of gratuity calculation how do i calculate ?
on 30 days or 26 days ?
what does the law says on this issue ?
thanks in advanced

From India
Dear Raj,

I am not able to find any law, stating an employee to claim Gratuity before completion of 5 Years...

As per the Payment of Gratuity Act, 1972:

4. PAYMENT OF GRATUITY.- (1) Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years, - (a) on his superannuation, or

(b) on his retirement or resignation, or

(c) on his death or disablement due to accident or disease : Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement :

Provided further that in the case of death of the employee, gratuity payable to him shall be paid to his nominee or, if no nomination has been made, to his heirs, and where any such nominees or heirs is a minor, the share of such minor, shall be deposited with the controlling authority who shall invest the same for the benefit of such minor in such bank or other financial institution, as may be prescribed, until such minor attains majority.

Explanation : For the purposes of this section, disablement means such disablement as incapacitates an employee for the work which he was capable of performing before the accident or disease resulting in such disablement.

(2) For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days' wages based on the rate of wages last drawn by the employee concerned :

Provided that in the case of a piece-rated employee, daily wages shall be computed on the average of the total wages received by him for a period of three months immediately preceding the termination of his employment, and, for this purpose, the wages paid for any overtime work shall not be taken into account :

Provided further that in the case of an employee who is employed in a seasonal establishment and who is not so employed throughout the year, the employer shall pay the gratuity at the rate of seven days' wages for each season.

Explanation : In the case of a monthly rated employee, the fifteen days' wages shall be calculated by dividing the monthly rate of wages last drawn by him by twenty-six and multiplying the quotient by fifteen.

Rest of this my friend the Act says:

(5) Nothing in this section shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer.

Hope you have got a clear Idea...:-P

From China
Dear Prashant,
If you follow the Payment of Gratuity Act, you need not pay Gratuity since the employee had left the organisation without completing five years of service with you, the minimum service required to be eligible for one to get Gratuity.

I presume that your increment letter is issued after one year of service. As such he will get gratuity after 4 years from then (date of increment) And if it is to be interpreted as 30 days gartuity for the whole years of service and not as 30 days per year of service, the amount of gratuity will be some thing less than what is to be paid as per the Act. The Act will permit any thing more than what is to be paid as per Act, but will not entertain an amount less beneficial to employee. Therefore, from the point of law it shall only be interpreted as 30 days per year and if it is clearly stated in the letter that the gratuity is 30 days for 5 years or 4 years as the case may be, the same will not be enforceable by law. Any way it is realy a mistake committed by you while drafting appointment letters/ increment letters. While drafting appointment letters/ increment letters always keep away from statutory contributions and payments which are not in our hands. You need just to say that" EPF/ ESI/ Gratuity..... as per law applicable from time to time" Many companies make similar mistakes even knowingly, just to improve morale of workers.

For all employees under time scale (those who are not piece rated) the amount of gratuity is calculated by dividing the monthly salary (Basic + DA only) by 26 and multiplying the same by the no. of years of service.



From India, Kannur
I would like to add one thing over here that recently I came to know from one of my friend that there is a Supreme Court ruling which states as under :
As per the latest judgement of honourable Supreme Court-
An employee is eligible for gratuity if he has completed 4 years of continuous service and 240 days continuous working in 5th year.

I am trying for the copy but still not able to get it. If anybody gets it please share it.

From India, Delhi
Dear Rajeev, That was a judgement of Madras High Court. Still the provision of completion of 5 years is in force. Rest is O.K.. Regards, ACCHR
From India, Mumbai
Dear Verma,
I have also heard about a similar judgement but I do not have a copy of the same. But still it is contraversial about the eligibility of gratuity which will be decided by the date of joining and completion of 5 years from such date. Till a verdict is received, I prefer, to be of safer side, to interpret it as 5 years from the date of joining.
As regards a particular year for which whether garuity will be due, there is directions that one who had worked for 240 days (above the ground) and 190 days (below the ground) will be considered as having continuous service. Similarly if during any year one could not work for 240 days he shall be paid gratuity for that year provided he had worked at least for 190 days and where his absence was due to any reason for which disciplinary action was not initiated.

From India, Kannur
I would like to add one thing over here that recently I came to know from one of my friend that there is a Supreme Court ruling which states as under :
As per the latest judgement of honourable Supreme Court-
An employee is eligible for gratuity if he has completed 4 years of continuous service and 240 days continuous working in 5th year.
I am trying for the copy but still not able to get it. If anybody gets it please share it.

From India, New Delhi
I had joined a company on contract (Payrolls of the company itself) for 6 months.
During this time also my CTC included Gratuity deduction.
Could you pls tell me if im eligible for reimbursement or carry forward of gratuity if im converted into a full time employee.

From India, Bangalore
There has been a contention that part time workers do not fall in the same category with regard to protection under the Industrial Disputes Act and other relevant labour legislations. The main points raised were:

1. A part timer is engaged in some gainful activity, either by way of self employment or with other employer, during the rest of the day. Therefore, unless it is established that he is not employed with other employer or the substantial part of his entire working time is with the employer, he cannot be considered as workman.

2. The Working Journalists and Other News Paper Employees (Conditions of Service)Act has specifically included ‘part time’ workers in the definition of workers whereas the Industrial Disputes Act or Payment of Gratuity Act did not intend to include part time workers and that was why they were not included in the definition of workers.

3. In the case of part time workers, control test to establish master servant relationship will not work because the part timer will have dual control by different employer.

4. If a part timer works for more than 10 ½ hours a day (the maximum spread over permitted) under two or three employers, which of the employers is said to be violating the rules?

5. If a part timer meets with an accident who is going to pay compensation?

6. A person working for more than 4 hours a day is expected to get full salary for the day and accordingly if one works for 4 ½ hours day with one employer and the same 4 ½ hours with another employer would be gaining wages more than that a full timer would get.

In view of the above, many decisions have come and various courts have given directions about part time employment. But what are relevant are the following:

1. If the part timer has been engaged for the substantial period with the employer he is said to have employer employee relationship

2. If the part timer is engaged for an activity which is integral and the manner of doing the work is as per the employer’s decision or where the control over his work is with the employer, the servant master relationship is established

In short a part time worker is also a worker as per law and all benefits as applicable to a full time employee is available to him also. At the same time, if the employer has no control over the person engaged then no way there will be employee employer relationship. This is true in the case of contract for services wherein the employer has no control over the person put in for service; he cannot control their timings nor can take any disciplinary action against them. In such scenario, the people engaged will not have any protection under the ID Act and they will not be entitled to gratuity and other benefits.


From India, Kannur
I have received one view from MADHU T.K. about the clarification of applicability of Gratuity Act to Part Time employees, who says that Part Time employee do not come under I.D. Act. He is not entitle for gratuity, but under section 2 (9) & 2 (f) of E.S.I. and PF Act respectively department consider the Part time as \"employee\" and cover him under the respective Acts. Where he either charges the EE/ER Contributions or ask to give the proof of salary of exceeding the applicable limit under the respective Act.
As such may I know whether there is any clarification/Circular issued any department about the definition o \"employee\" by any department? If there is any it may effect under the Gratuity Act too.

From India, Chandigarh

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