I have a question regarding gratuity.
I have an employee who has joined us on april 3rd 2006. As our project is ending we have asked him to resign. I would like to know if he is entitled for gratuity. This is for a company whose corporate office is in bombay but he is working in Bangalore.
Thank you.

From India, Nellore
If you follow the Payment of Gratuity Act, he may not be entitled to get gratuity but since he has already completed four years of service and you are sending him out before the project comes to an end, your act of demanding or even requesting his resignation shall only be treated as an effort to avoid payment of gratuity. That will not be allowed and the notice period which an employee is entitled shall be counted as service and if so, he will get entitlement for gratuity. Hope you have a notice period clause in your appointment order served to the employee that the employee should serve one month notice if he wants to leave and if so, that is applicable to you also.

As the project has not come to an end, and there was no predetermined date of expiry of contract with the employee, your request to the employee to resign shall also mean that you are terminating or retrenching his service. If so, you are liable to pay him retrenchment compensation also at the rate of 15 days salary for every completed year of service, ie, five years. On the other hand, if he serves the full tenure of the contract and is terminated on completion of the project you need not pay retrenchment compensation.

Either gratuity or retrenchment compensation is a must. Both are almost equal amount but gratuity will be little bit higher since it is worked out by average salary based on 26 days whereas retrenchment compensation is worked out based on 30 days. The risk is that if you retrench him now and the employee approaches the Payment of Gratuity Authority, he may award that gratuity should be paid. If so, your liability would be double.



From India, Kannur
Dear Mr. Madhu Ji,
To the best of knowledge and belief, the condition of completion of 5 years service for gratuity eligibility does not apply if the employer shuts down business or the project is completed before the employee completes five years service. May I therefore request you to please check this afresh and confirm the correct position of law ? Thanks and regards

From India, Pune
In any case if an employee's gratuity to be calculated, and he / she has completed 4 years and 6 months of continious service in which minimum of 240 days should have been worked, it is to be taken that an employees has completed 5 years of service to be entitled for gratuity and the gratuity is payable on basic plus d. A. If there. Since here you are asking to resign, you ought to pay if do not want to create any legal entangles
From India, New Delhi
Payment of Gratuity Act has no provision to exclude an establishment set up for a particular period. I am not sure if there is any case law governing the matter. Any way, let us wait for some more inputs.
Dear Pankaj,
A fraction of a year for more than six months is taken as one year; but that is for calculating the amount of gratuity and not for deciding eligibility, for which completion of 5 years is mandatory. Even in the Mettur Beardsell's case the Madras High Court's verdict was based on the fact that the concerned employee had worked for 240 days in the fifth year. Therefore, even if you follow that case it is necessary that the employee should have worked at least for 240 days in the fifth year and in a period of six months it is not possible to work for 240 days.

From India, Kannur

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