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Dear All,
I have a doubt that is it compulsory to complete five years for becoming eligible for gratuity.
also for gratuity calculation, pls confirm, is the below formula correct??
basic salary*15/26*no of years Service
Thanks & regards,
Prakash rawat
From India, Gurgaon
Dear Prakash Ji, Gratuity actual calculate is - 15/26*no of service year and month*basic salary
From India, Bhopal
Hi all can you provide payroll proceess QC template in Excel Regards, manjuanth 9743481431
From India, Bangalore
Calculation of Gratuity as per Sec. 4 of the Gratuity Act is as under-
Monthly Salary (Basic+DA) /26 *15*no of years of service = Amount of Gratuity payable (Must not Exceed to Rs. 10 lakh)
Yes, as per sec. 4 of the Act, minimum qualifying period is 5 years.
pkjain
From India, Delhi
Gratuity is applicable only to Basic and Dearness allowance of the employee.
To calculate the gratuity. A month salary+DA divided by 26 days (i.e. month)x no of years service completed.
Qualifying period 5 years
From India, Coimbatore
Dear Mr.Prakash,
Gratuity eligibility comes after continuous 05(five) years of service. The five year service means the 4 year and 240 days of the 5th year i.e. 04 year 10months and 18 days. But at the time of calculation if there is more than six months or part thereof will be considered as one year.
Please find enclosed judgment, hope that will serve you purpose.
With Regards,
Sandip Saha

From India, Kolkata

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File Type: pdf Gratuity Judgement for 240 days.pdf (1.55 MB, 1001 views)

to avail gratuity 5 yrs of service for regular employees 160 days in mines 240 days for seasonal employees the max amount can be given is 3,50,000.
for monthly employee the calculation is :
last drawn wages / 26* 15* no. of years of service completed.
in case of mines / piece rated employees :
avg.wages /26*15* no of years completed.
for seasonal employees:
7 days of wages for every completed year of service .
From India, Madras
it can exceed 10 lakhs, there is no margin on that, its that if it crosses 10 lkhs, then it becomes taxable.
From India, Calcutta
Dear Prakash,

Mr P K Jain has rightly descibed the formula for calculation of Gratuity. However, I would like to throw some light on eligibility for Gratuity entitlement in the fifth year.

The gratuity eligibility as per Gratuity Act 1972 is 5 years of continuous service. Sub Section (2) of Section 4 of Gratuity Act, 1972 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 is synonymous, the same principal can be adopted under the act also and hence an employee rendering service of 4 year 10 months and 11 days is considered to have completed 5 years continuous service under Sub Section (2) of Section 4 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 the 5th year.

There is one more judgment as delivered by the Madras High Court on the eligibility of gratuity is as under :

Hon’ble Justice Mr. S.M. Abdul Wahab J. (W.P. No. 2135 of 1987) gave his verdict on 12.6.1996 in the case betwee Mettur Beardse Ltd., Madras and Regional Labour Commissioner (Central), (Authority under Payment of Gratuity Act) & Others (1998 LLR 1072).

Thus an employee who has put in service for 10 months and 18 days for the fifth year subsequent to first 4 years should be deemed to have completed continuous service of five years. His claim for gratuity is tenable.

Rgds,

Rakesh Pd Srivastav
From India, Gurgaon
While paying gratuity ''continuous services'' should be considerted as per its definition given in the Act.Thus if an employee dies while in service, gratuity is payable to him,even though he has not completed five years of continuous service.
From India, Delhi
Dear Rakesh,
Thanks for your explanation how does 10 months 18 days make 240 days, i.e. if a person joins on 1st jan his 240 days will get completed on 7 months and 27 days .i.e. on Aug 27th.
Regards
Aslam Sha
From India, Madras
Dear Aslam,
This was based on actual working days and considering the number of absence /leave without pay etc. the person completed his 240 days (working days) in 10 months and 18 days on the fifth year. I think, it explains now.
Rgds,
Rakesh Pd Srivastav
From India, Gurgaon
Rakesh, The explanation shall be helpful and HR community shall be clear that Gratuity eligibility is 4 years and 240 days, and not 5 years. Regards Aslam sha
From India, Madras
As per Sec. 4 (3) of the Gratuity Act which read as under-
" The amount of gratuity payble to an employee shall not exceed ( ten lakh rupees)."
Earlier this limit was 350000/-
kindly guide me in this regard.
thanks
pkjain
From India, Delhi
Dear Mr Jain,
As per the latest amendment dated 08.04.2010 the ceiling of Bonus has been enhanced from Rs. 3,50,000 to a maximum of Rs. 10,00,000 as also the exemption threshold from income tax on it.
Rgds,
Rakesh Pd Srivastav
From India, Gurgaon
my query is whether the amount above Rs. 10L is payble under the provision of GA or not. suppose as per the calculation if amount comes to Rs. 11L whether Rs. 10L to be paid or full Amount of Rs.11L
From India, Delhi
I agree with Mr. Kargonkar.

And would like to share a opinion in this regard ( which was obtained by me In this CiteHR only posted by some member.

The Querist seeks my opinion as to certain employees having made a claim for gratuity, who have worked for four years and in the fifth year, have worked for 240 days but have not completed five years of service. The Querist further seeks my opinion as to whether the concerned employees in such a case would be entitled to payment of gratuity under the provisions of the Payment of Gratuity Act, 1972 (the said Act)



The Querist’s kind attention is invited to Section 4(1) of the Payment of Gratuity Act, which is reproduced as under:

“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,

(c) on his death or disablement due to accident or disease.”

The Querist’s kind attention is also invited to a decision of the Madras High Court in the case of Mettur Beardsell Ltd., Madras v/s Regional Labour Commissioner (Central), Madras, reported in 1998 III LLN 414. In the facts of the said case, the concerned employee had put in 4 years, 10 months and 18 days of service. The Competent Authority held that there was a continuous service under the provisions of Section 2-A of the Payment of Gratuity Act and he must be deemed to have completed continuous service of 5 years. The Company challenged the said order by filing a Writ Petition before the Madras High Court under Article 226 of the Constitution of India. The Hon’ble High Court has observed as under:

“Sec.2-A defines continuous service. According to this section, if an employee renders continuous service for a period of 240 days in a year he will be deemed to have continued in service for one year. This deeming provision contained in Sec.2-A must be applied in interpreting the period of five years mentioned in Sec.4(1). Section 2(b) also supports this interpretation because as per the said section completed year of service means continuous service for one year. Therefore, these provisions are emphatic in stating that if an employee serves continuously for a period of 240 days in a year, he must be deemed to have continuously served for one year. In this case admittedly the third respondent has served for 4 years, 10 months and 18 days. 10 months and 18 days service is definitely more than 240 days. Therefore when the third respondent was relieved from service he has thus completed five years of service ………………… Therefore, I am not convinced with the contentions raised by learned counsel for the Petitioner. Hence the writ petition fails……..”

The attention of the Querist is invited to the following provisions of the said Act:

“2(b) “completed year of service” means continuous service for one year.”

“2(c) “continuous service” means continuous service as defined in Section 2-A.”

“2-A. Continuous Service:- (1) For the purpose 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 rendered before or after the commencement of this Act

(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) 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.

(b) for the said period of six months if the employees during the period of six calendar months preceding the date with reference to which the calculation is to be made, has actually worked under the employer for less than:

(i) ninety-five 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) one hundred and twenty days in any other case.”

On going the above provisions under the said Act, I am of the view that the Querist can differ with the view taken by the Hon’ble Madras High Court. The language of Section 4(1), and particularly the words emphasized by me above, strongly suggest that Parliament consciously and deliberately prescribed a minimum employment period which an employee must complete before becoming eligible for gratuity. The words “after he has rendered continuous service for not less than five years”, to my mind, lay down an absolute minimum which is not susceptible to any reduction, except in cases of death or disablement, which are specifically excluded from the minimum requirement under the proviso. When the legislative draftsman uses words in the negative such as “not less than”, or “until” or “unless”, they are normally treated as being imperative in character, and depending on the context in which they are used, the Supreme Court has generally treated them as mandatory.

Sub-Section (1) applies to all situations where the period of employment is in question, whether it be a period of five years, or one year, or six months. Hence, sub-section (1) uses the words highlighted by me above, namely “for a period”, and “for that period”. This sub-section is only concerned with specifying what types of interruption in work will not be treated as interruptions in service for the purpose of gratuity. If the period to be considered is five years, then one would merely read in the words “five years” in place of “a period” and “that period” in sub-section (1). That sub-section then makes it clear that an employee will be said to be in continuous service for five years, if he has, for five years, been in uninterrupted service, including service which may have been interrupted in any of the circumstances set out in the sub-section. On the other hand, if the period to be examined were one year, or six months, one would need to read in the words “one year” or “six months” in place of “a period” and “that period.”

However, while sub-section (1) of Section 2A deals with all the different periods which may arise for consideration under the Act, sub-section (2) deals only with periods of “one year” and “six months”, while sub-section (3) deals with period of employment in seasonal establishment. The effect of the three sub-sections when read as a composite whole, is that sub-section (1) is a general provision which excludes certain types of interruptions / breaks in work while considering continuous service for any period, whether it be 5 years, 1 year, 6 months, or seasonal work; sub-section (2) pertains only to periods of 1 year or 6 six months; and sub-section (3) is concerned only with seasonal establishments. To try and telescope the provisions pertaining to 1 year service or 6 months service into calculation of the 5-year minimum qualifying service, is thus based on an essential fallacy which treats all the sub-sections of Section 2A as one, and overlooking the clear distinction between the areas covered by each sub-section.

The Querist is advised to note that apart from the Hon’ble Madras High Court, no other High Court had the occasion to consider the question raised by the Querist and there is, therefore, only the said judgment which directly addresses the issue of whether an employee has to actually serve for five years before becoming eligible for gratuity or whether service shorter than five years could also be taken as fulfilled qualifying period, if the employee has worked for 240 days in the last year of employment. In the most recent decision of the Hon’ble Supreme Court in the case of In Grand Kakatiya Sheraton Hotel and Towers Employees and Workers Union v/s Srinivasa Resorts Ltd., reported in 2009 5 SCC 342, the Supreme Court upheld the judgment of the Andheri 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. In para 47 of its judgment, the Supreme Court held as follows:

“47. 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.

Though the precise question raised by the Querist was neither considered in the above-mentioned judgment nor in any other pronouncement of the Supreme Court, the approach adopted supports the view that the minimum qualifying period of 5 years as prescribed in the Act should receive a strict construction.”

It may, however, be noted that the Querist would not be legally bound to follow the decision of the Madras High Court in respect of the locations / establishments of the Querist situated outside the State of Tamil Nadu. However, in the State of Tamil Nadu, the Querist’s establishment will be bound by the decision of the Hon’ble Madras High Court. However, if the Querist decides not to follow the binding precedent laid down by the Hon’ble Madras High Court in the State of Tamil Nadu, the Querist will have to contest the subject-matter independently before the Madras High Court till the said matter is conclusively decided by the higher courts.

I am, therefore, of the view that an employee who has completed four years of service and worked for 240 days in the fifth year, does not complete five years of continuous service and will not be entitled to gratuity under the provisions of the said Act.
From India, Delhi
As per the definition of 'continuous service' in P of G Act gratuity can be payable if a person has 4 yrs continous service and has actually worked for 240 days in 5th year.
VARGHESE MATHEW
09961266966
From India, Thiruvananthapuram
Dear Prakash To avail gratuity minimum service required 4 Year & 8 Month.Its is calculated on Basic Salary+ D A. Formula is- Basic Salary + D A/26*15*No of years
From India, New Delhi
Dear Prakash, I agree with Mr. PK Jain in the case of Gratuity formula and yes 5 years is mandatory.But in case of death or disablement 5 years is not mandatory. Thank you With regards Mimu
From India, Mumbai
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