Industrial Relations And Labour Laws
Labour Laws & Ir
Deputy General Manager - Personnel
Korgaonkar K A
Personnel Officer Cesc Ltd.
Me also have heard that:
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.
This I have posted this in my thread, but not able to get the same till date.
SC Ruling on Gratuity Act
Welcome to CiteHR.
Then approach the Payment of Gratuity Act enforcement agency. If you are to receive gratuity under PG Act, 1972 then first decide which is your appropriate Govt. & then file a complaint before your area labour office.
25F is different from Payment of Gratuity. Retrenchment compensation is available to all employees who have completed at least one year of service and that one year means 240 days of working.
The Judgment of the Court applies to the facts of that case unless the provision is erased i.e struck down from the Law Book.
Let not HR Professionals get confused.The law is completion of 5 years.
While agreeing on completion of 5 yrs but please clarify the definition of 1 completed year. If I refer to the
Section 2 A) on continuous service which reads as follows :
Section 2-A: Continuous service
For the purposes of this Act,-
(1) An employee shall be said to be in continuous service for a period if he has, for that period, been in uninterrupted service, including service which may be interrupted on account of sickness, accident, leave, absence from duty without leave (not being absence in respect of which an order [* * *] treating the absence as break in service has been passed in accordance with the standing orders, rules or regulations governing the employees of the establishment), lay-off, strike or a lock-out or cessation of work not due to any fault of the employee, whether such uninterrupted or interrupted service was
(2) Where an employee (not being, an employee employed in a seasonal establishment) is not in continuous service within the meaning of clause (1), for any period of one year or six months, he shall be deemed to be in continuous service under the employer-
(a) For the said period of one year, if the employee during the period of twelve calendar
months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than-
(i) one hundred and ninety days, in the case of an employee employed below the ground in a mine or in an establishment which works for less than six days in a week ; and
(ii) two hundred and forty days, in any other case ;
what I decipher from the above is that one year would be considered as complete in case an employee has continuous service of 240 days if an orgn has 6 days week or 190 days in case less than 240 days.
Can you throw some light on this please...
In order to arrive at the 240/190 days for deciding whether the year will constitute continuous service or not, all paid days, holidays, leave with pay, lay off days, legal strike days 9for which payment is made to employees) maternity leave days (in case of female employees) etc are considered as days worked. That means, if Saturdays and Sundays (if these are two days of off) are paid holidays, then there seems to be no meaning in saying that 190 days should constitute continuous service because in such cases an employee is getting a direct bonus days of 52 days which others who work for six days in a week would not get. In the former case, included in 190 days are 104 days of off (at the rate of two days per week), say 13 national and festival holidays which are mandatory, say around 36 days leave with pay and a working of just 37 days! In the latter case it should be 139 days of physical work, 52 days of weekly off days, 13 holidays and 36 leave days.
Therefore, it should be interpreted without reference to number of days worked in a week but with reference to number of paid days in a week.
I have joined Tata Communication Ltd. on 2nd Jan 2007 and last working day was 05 Aug 2011. My total Continuous working days are 4 years and 215 days.. We had 5 working days and 2 days weekend off.
Now, am i eligible for Gratuity amount which is declared as part of my CTC?
I communicated the same several times to Finance team, however they rejected saying as per Tata Trust rule, i have to complete full 5 years to get my gratuity amount.
If there is a supreme court judgement on this subject, wont that applicable to Tata Trust?
I worked in Tata Communications Ltd from 02 Jan 2007 till 05 Aug 2011, which is total of 4 years and 215 days.. that company was working 5 day a week and as per the SC order, 4 years and 190 would qualify for gratuity amount.
In this case, is my case eligible for gratuity? The finance team is saying, as per Tata Trust rule, i have to finish 5 years?
Is SC order wont apply to trusts like Tata?
On the other hand, i am currently working in a MNC company at Hyderabad, they are considering 4 years and 190 as gratuity eligible period and paying the amount. Then why my previous employer denying this by saying, it wont apply to Tata Trust?
Need ur help to move further on this..
Kindly find attached the Bare Act of the Gratuity Act 1972. The extract of the section 2A is given below:-
Also i have attached the Gratuity Act 1972 Bare Act. Therefore it is very clear that the calculation is for 4 years 240 days.
Also all organisations irrespective of their own trust have to follow the rules. Their rules can differ if they are more beneficially to the employee than the present act.
The extract is below:-
The gratuity eligibility as per Gratuity Act 1972 is 5 years of continuous service. Sub section (2) of section 4 is for calculation of gratuity and not for the eligibility of gratuity.
But as per the judgment of the 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. On the day when he completes his 240 days in the 5th year he will be eligible for gratuity.
The judgment of Supreme Court rendered under the provisions of the Industrial Dispute Act in Surendra Kumar Verma vs. Central Govt. Industrial Tribunal,[(1980) (4) S.C.C.433)], it is enough that an employee has a service of 240 days in the preceding 12 months and it is not necessary that he should have completed one whole year’s service. As the definition of continuous service in Industrial Dispute Act and Payment of Gratuity Act are synonymous, the same principal can be adopted under the act also and hence an employee rendering service of 4 year 10months 11days is considered to have completed 5 years continuous service under sec.4(2) and thereby is eligible for gratuity."
Now almost all organizations are paying gratuity if an employee has completed 4 years of continuous service and 240 days continuous working in 5th year.
Thanks for your detailed information.. So if the organization is working 5 days a week, does 5th year can be considered as 190 days?
like 4 years and 190 days if company follows 5 days week and 4 years 240 days when company follows 6 days week?
Appreciate your response.
Ashutosh: Please share the Supreme Court ruling you have mentioned in your post.
The SC judgment which you have quoted is not pertaining to Gratuity Act but it is pertaining to provisions under ID Act.
In this thread four years back, Mr. Madhu and Rajanassociates had given their opinion. Mr. Madhu is a Super Moderator of our Forum having very vast experience in IR. Rajanassociates are Legal Counsel / Advocate practicing for very long time in Labour Laws field. Still you differed with them.
One can differ with any one but with full equipped knowledge.
I want to ask you one simple question. If there is a Judgment on this subject by SC in 1980 then how the Madras HC and Kerala HC admitted the matter on the same subject after 1980?
We are concern with the Law and not what is being Practice. The Practice is adopted by the people who presumption that what they know is the Law. In of the recent threads one HR Manager said that Gratuity is deducted from salary and given later-on separation.
I am sorry. I would not said all this. I could not control myself.
Thanks for the frank reply.
I know that the case was under the ID ACT, but it was pertaining the gratuity and the SC has clearly said that as the definition of continuous service in Industrial Dispute Act and Payment of Gratuity Act are synonymous, the same principal can be adopted under the act also and hence an employee rendering service of 4 year 10months 11days is considered to have completed 5 years continuous service under sec.4(2) and thereby is eligible for gratuity.
Hope i have clarified your doubt.
You have not answered to my question.
I have no doubt in my mind and I am very clear on the subject. I started feeling that I am unnecessary spending my time in sharing my knowledge on this forum.
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To conclude this subject, please find attached a judgment of Hon’ble Supreme Court in Grand Kakatiya Sheraton Hotel & Towers
Employees & Workers Union v. Srinivasa Resorts Ltd. & Ors. delivered on 27.02.2009.
Hon’ble Supreme Court in this case upheld the judgment of the Andhra Pradesh High Court, by which that court had struck down as unconstitutional the provisions of the Andhra Pradesh Shops and Establishments Act by which gratuity was made payable even to employees who had not completed 5 years service as per the Payment of Gratuity Act, 1972.
Given below is some text verbatim on page 11 of the Judgment:
"It is already held by this Court time and again that the concept of gratuity as conceived in the Payment of Gratuity Act and even earlier to that in labour jurisprudence is that gratuity is a reward for long and continuous service. It is for the first time by that Act, a worker or an employee was made entitled to the gratuity by his rendering continuous service for five years. If this is so, then providing only one year for entitlement to get the gratuity, is certainly unreasonable."
In light of above, my humble request to the learned members of this forum to conclude this subject. No further contribution from my side will be done on this topic unless some one raise a question of law.
My humble request is to please clarify, where in the attached case has the court ordered at Contunious 5 years of working is not 4 years and 240 days. The entire case is in a different angle.
The discussion which are all are trying to understand is if 5 contunious years of service is equalient to 4 years and 240/190 days.
Coming to your question as to why the court admitted the cases if they had a verdit before, i am very sorry, but me not being a lawyer, i shall not be able to comment on the same.
Thanks for appreciating my last post.
My humble submission here is as under:
On this subject I have contributed enough with the limited knowledge I have. I do not wish to contribute further as said earlier. Let's experts / senior members contribute.
From the above discussions, I understand that if an organisation is working 6 days a week, in that case 240 days of continuous service in the 5th year, is sufficient to be considered as complete year service for payment of gratuity, which requires 5 years of continuous service.
The 240 days of continuous service in the 5th year mentioned here are completed in 10 months and 11 days (=315 days = 45 weeks) in the 5th year of service.
Can someone explain how 240 days continuous service gets completed in 10 months and 11 days ?
There have been discussions over the issue of 240 days in the 5th year as a qualifying period for gratuity for a long time and the situation remain the same. Still, if you follow the Payment of Gratuity Act, the gratuity qualifying service is 5 years. It is true that in order to be considered as continuous service for the purpose of gratuity a period of 12 months should have at least 240 paid days. It is on this basis that many of us say that if you have 240 paid days in the 5th year you will get gratuity because one year means 240 days. The two judgements that many of us quote also have also interpreted the provision of one year service as 240 days.
Madhu T K
In one of the above posts following point has been mentioned with reference to judgement of the Supreme Court-
"The judgment of Supreme Court rendered under the provisions of the Industrial Dispute Act in Surendra Kumar Verma vs. Central Govt. Industrial Tribunal,[(1980) (4) S.C.C.433)], it is enough that an employee has a service of 240 days in the preceding 12 months and it is not necessary that he should have completed one whole year’s service. As the definition of continuous service in Industrial Dispute Act and Payment of Gratuity Act are synonymous, the same principal can be adopted under the act also and hence an employee rendering service of 4 year 10months 11days is considered to have completed 5 years continuous service under sec.4(2) and thereby is eligible for gratuity."
My query is related to requirement of service period for eligibility of Gratuity-
My organisation does not work on 2nd and 4th Saturday every month. Hence, my case falls in between 5 day working and 6 day working.
My service period in the organisation is 4 yrs and 244 days as on last date of my services.
Whether I will be eligible for receiving Gratuity Payment from my organisation?
The issue of retrenchment compensation is different. In order to be eligible to get retrenchment compensation, just a service of one year is sufficient. In the case of gratuity, it is not one year but 5 years. It is true that 240 days of service constitutes one year under both the Act. It is so in the case of eligibility for leave under Factories Act and Plantations Labour Act.
For eligibility of gratuity one should have worked for not less than 5 years continuously with each year having at least 240 days (paid days). If you have worked for more than 5 years, say, 8 years but in between there are, say, four years with service of less than 240 days, the employee will not get gratuity. In this context we should also consider that if the employee has not "worked" for 240 days but was "employed" for 240 days, he will get gratuity. And if an employee "employed", has remained absent without leave and as a result of his absence, he could not work for 240 days, then he will not get gratuity. These equations are true in the case of temporary workers who are not "employed" continuously on the rolls of the employer but are called or engaged to "work" whenever required.
Therefore, the first qualifying parameter is 5 years of service and the second thing is that each year should have 240 days pay days. When the first milestone is not reached, naturally, he will disqualify from gratuity. At the same time, Madras High Court and Kerala High Court, having interpreted the Gratuity Act to make it available to persons who were not employed for 5 years but were employed for 4 years and 240 days in the 5th year, we can also follow it. But, if your employer rejects saying that you have not completed 5 years and then the Appropriate authority, ie, the Labour Officer, supports it, you will have no other choice but to prefer a complaint interpreting the law as above and quoting the above two verdicts.
Madhu T K
I welcome your first ever post on this forum.
I am producing section 4(2) of POG Act verbatim as under:
Sec 4(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.
What does it mean part thereof in excess of six months?
According to this, more than six months is to be taken as full year.
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. This is the Law. I have given you the provision verbatim. There is no ambiguity in it. The wordings are beyond clarity. Still you want case reference. Why?
You are a HR professional. If you have a doubt in the provision or have a dispute in it, you are free to represent your case, set a case law and and give the case reference to this forum.
Now education dept asked me if you have law orders or any written information than provide us.
Please help if anybody help me.
While working with one of private company, it was practice that, even in case of eligible permanent workers who has rendered service more than 5 years, they considered those years in which the worker has physically present for 240 days. The management's interpretation was that, the gratuity is payable according to Section 2 A (2) (a) (ii) of the Payment of Gratuity Act, extract of the clause is shortly stated below.
[2A. Continuous service.—For the purposes of this Act,—
(1) an employee shall be said to be in continuous service ............................
(2) where an employee (not being an employee employed in a seasonal establishment) is not in continuous service within the meaning of clause (1), for any period of one year or six months, he shall be deemed to be in continuous service under the employer—
(a) for the said period of one year, if the employee during the period of twelve calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than—
(i) one hundred and ninety days,....................................
(ii) two hundred and forty days, in any other case;
After reference of provisions of the Act & some case laws as well as discussions had with seniors, my assumptions is, the above clause may applicable to Badali/Temporary workers who are working in absence of permanent worker for time being.
My query is, Is it legal and proper to apply above clause of 240 days actually worked in each year for eligibility of gratuity payment to permanent employees ? Is there any case law in which Hon'ble Court may have explain in details or made interpretation on the above clause is not applicable for the gratuity payment of permanent worker ?
If employee is not fulfilling the requirement give in the sec 4 (I) of POG act 1970 so what is logic of sec 4(2) of POG act 1970.
Can anyone please explanation on the above points? If anyone can give any case study/court ruling/judgement related to this matter, really appreciated..
The issue of 240 days has nothing to do do with the above. 240 days is the bare minimum paid days required for an employee even to become eligible for gratuity. That means if you have lots of unpaid leaves in each year as a result of which you fail to get 240 days in a year, such years will not be counted for gratuity calculation. Continuing the above example, say, out of 8 years, there was a year, say 2017, in which you did not attend to work for a few months but could attend only for 220 days in total and the absence remained unregularised, then that year will not be taken for gratuity calculation. at that time you cannot say that you had worked for more than six months in that year, 2017, you should get the benefit of one year gratuity. This fraction matter appears only in the last year and not in between the service.