Labour Law & Hr Consultant
Working As Assistant General Manager (personnel)
Korgaonkar K A
HR & Labour Law advisor
14th March 2013 From India, Mumbai
IN CONTINUATION OF THE views expressed by the learned members, I WOULD LIKE TO ADD THE FOLLOWING;
'Gratuity' is one among the triple terminal benefits viz., gratuity,provident fund n pension available to the workmen in India. As such, the Payment of Gratuity ACT,1972 is a social security legislation. That's why the Act been amended 7 times since 1984 to 2010 extending its coverage, applicability and other details so as to achieve the purpose of the enactment stated in its preamble.Therefore, whether stated in the policy of any individual organisation or not, the right is still available to its employees.
14th March 2013 From India, Salem
While endorsing the responses by every one, just I wish to say that the POG Act is applicable to establishment employing 10 and more employees during past 12 months. Further, once the Act is applicable to any establishment, it is applicable forever. All the members who participated in this discussion knows this but somehow they missed out to mention it. Govind ji did mention it in his blog.
Thanks & regards.
14th March 2013 From India, Mumbai
Payment of Gratuity Act, 1972 is applicable to those establishment / factory where 10 or more employees are working. Even though iyour company policy explicitely expressed on gratuity as per statue this Act will apply to your organization. Howerver, gratutity is applicable only when the employee has put in continuous service of 5 years.
15th March 2013 From India
I always said that no company's policy is above Law. As stated above by many it is a statutory right of an employee and cannot be evaded under any circumstances. Rest assured if you complete 4 years and 240 days in your company you are entitled for gratuity irrespective of any company policy.
16th March 2013 From India, New Delhi
If the organisation refuses to pay gratuity giving the following reasons:
Running in loss
No profit etc can the employees claim or move to the court?
17th March 2013 From India, Calcutta
Dont worry you are entitled for gratuity even if they are running into losses.
17th March 2013 From India, New Delhi
Our senior members have rightly portrayed the applicability and coverage of PGA. I would only add flavour to the discussions through following points.
- Irrespective of gain or loss, the employer is bound to pay the eligible employee, as per the Act in vogue.
- You apply for gratuity within 30 days from the date it becomes eligible, to the employer. The nominee/legal heirs of the eligible employee can also apply in the said time zone. It can even be applied in plain paper with RELEVANT PARTICULARS by the nominee or legal heirs.
- Even after the expiry of the above period, you can apply for the same if you show-cause sufficient reasons for the delay in preferring your claim and the employer cannot reject your claim on this ground.
- Any dispute arises as regards to the payment of gratuity, you may approach the Controlling authority, in writing, directly in person or through registered post within ninety days of the occurrence of the cause, who will then direct the employer for further course of action. Generally, Assistant Labour Commissioner of your region will be the Controlling authority. Here also, you can apply after the expiry of ninety days, if you show-cause valid reasons for any delay in approaching the Controlling Authority for his direction.
17th March 2013 From India
i have completed 3 & 1/2 years in this organisation is gratuity applicable. is my earlier service considered?
Kindly give some suggestions for this.
18th March 2013 From India, Hubli
If they haven't appointed you afresh and your employment is continued, Yes, you will be entitled for your gratuity after the minimum eligibility period i.e. 4 years and 240 days of service. Please do tell if they employed you afresh or not.
18th March 2013 From India, New Delhi
1)Changes in the constitution of the establishment is inconsequential in so far as the applicability of the P.G.Act is concerned and it will not have any negative impact on the length of service rendered by its employees. Conversion of an establishment from sole-proprietorship to that of partnership or to that of a limited co under the Companies Act,1956 etc is a mere cosmetic change in relation to the subject-matter of gratuity.
2) Since the application of the Act has already commenced, it will continue to apply not withstanding the subsequent changes in the establishment's constitution and the no of employees.
18th March 2013 From India, Salem
This is not according to any judgment only. The same is given in the act itself. Also there are a lot of judgments on the same not only one. This is simple interpretation of the provision. The logic behind this is given below please understand the same.
Section 4 (1) says about the eligibility for gratuity. The section is given below.
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:
1[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.]
Now let us see the definition of one continuous year of service under section 2A
[2A. 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 2[***] 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) one hundred and ninety days, in the case of any employee employed below the ground in a mine or in an establish-ment which works for less than six days in a week; and
(ii) two hundred and forty days, in any other case;
Now in the light of the above provisions we can say that a person is eligible for Gratuity when he completes 4 year and 240 days in the fifth year.
Please revert in case of any further doubt.
19th March 2013 From India, New Delhi
This is in response to the divergent views being exchanged between our learned members Mr.Kamalkant n Mr.Korgaonkar.In this connection, I would like to invite ur kind attention to my reply posted on 25-02-13 for the query on 'eligibility for gratuity'raised by Ashima.Reiterating my brief view point,I add the following in order to clear the cloud of confusion:
'Eligibility for gratuity' is, in my considered opinion, entirely different from 'Entitlement to gratuity'. Normally,'eligibility' makes a person qualified for a certain right under a statute whereas, 'entitlement' enables the same person to stake a claim for the enforcement of that right.The difference may seem apparently very thin n subtle;but the implication is very much vast n deep.It is always correct that an entitled person is an eligible one but not necessarily the vice-versa. All will agree with me that what is contemplated under the P.G Act,1972 is a scheme of gratuity to industrial employees based on certain length of blemishless service.To be positively brought into the scheme, one should have certain qualifications.In the first place he should be an 'employee' as defined u/s 2(e) of the Act.Secondly there should be termination of his service on a/c of superannuation,retirement or resignation or death or disability due to accident or disease after rendering of not less than 5 years of continuous service.But the proviso to the sub-section provides the relaxation that the condition rendering of 5 yrs of service is not necessary in the case of death or disability.Therefore, in all other cases, if a person wants to take advantage of the gratuity scheme contemplated by the Act,he has to prove that his period of service was continuous for not less than 5yrrs.Se 4(1) incorporates the concept gratuity being a reward for long continuous n meritorious service.Adverting to the definition of continuous service u/s 2A, the insertion of the new sub-sec was consequent on the legislative intervention suggested by the Supreme Court in Lalappa Lingappa v Laxmi Vishnu Textile Mills Ltd(AIR1981-SC852).As I said in my earlier post, it is only for the specific purpose of arriving at the actual no of days worked in a particular period of time in order to ascertain the entitlement of gratuity for that period.In other words, the emphasis in S4(1) is on continuity of employment whereas in S 2A it is on uninterruption of employment.While considering the eligibility of workman for gratuity on voluntary resignation in Dharshan Engg Works v. Controlling Authority (1983 Lab IC) the Supreme Court held that the minimum period of qualifying service for 5 yrs by a workman for being eligible for gratuity on voluntary resignation u/s 4(b) of the Act could not be stamped as sufficient long minimum in the context of making him stick to the employer.In construing the word 'workman' insec 33C(2) OF the I.D Act,1947 in National Buldg Construction Corpn case (AIR 1972 SC1579) the Supreme C ourt held that the word included adismissed workman also though in the definition of that word a dismissed workman is included only for the purpose of industrial disputes u/s 10.Again quoting yet two other judgments of hon'ble Supreme Court in AIR1997 SC628 AND ONGC (1997)2SCC 42 I conclude my reply with the following observations of the Supreme Court:
"While interpreting a definition, it has to be borne in mind that the interpretation placed on it should not only not repugnant to the context, it should also be such as would aid the achievement of the purpose which is sought to be served by the Act.A construction which would defeat or was likely defeat the purpose of the Act has to be ignored n not accepted."
20th March 2013 From India, Salem
Nice reply but not everybody will be able to understand the difference in both. What we are discussing here is that if a person is entitled for gratuity when he completes 4 years and 240 days which is also as per my personal numerous experiences or exactly after 5 years from the date of appointment. Gratuity Act is a beneficial legislation and while interpreting any provision of any beneficial legislation we have to give the most liberal interpretation possible. In Lalappa Case (copy Attached) the question before supreme court was regarding the Continuous Services. But while deciding the entitlement of gratuity we have to see that in fifth year the year completes in 240 days as given in the act or in exact 5 year from the appointment date.
In my opinion 240 days makes 1 completed year of service as per gratuity act hence a person is entitled for gratuity when he completes 4 years and 240 days of Continuous Services with one employer.
20th March 2013 From India, New Delhi
Simply put, eligibility for gratuity will arise only when the employee completes his 5th year of service in the same estt ie., there is continuity of employment up to 5 years. A s you say that suppose he leaves his employment on completion of the 240th day of service, he will not be fulfilling the required minimum length of service from the date of entry. that's my point
20th March 2013 From India, Salem
I find the discussion very interesting , more so for the technical deftness with which you explained the scope of Sec.4(1) and Sec.2-A and the expressions ‘Eligibility’ and ‘Entitlement’. However, without going into legal nuances of the discussion in order to keep it simple, I may say that there is no difficulty in determining an employee’s eligibility with reference Sec.4(1) where he is in employment under an employer for five years uninterruptedly. However, the difficulty arises when an employee is not able to complete the fifth year or the last 12 months since he gets terminated after serving eight or nine months.
If the eligibility is to be determined solely on the basis of Sec. 4(1), he becomes ineligible. To deal with such contingencies, Sec. 2-A, as you are well aware, has been introduced where in a deeming provision was incorporated under Sub-Sec.(2)(a) &(b) of Sec.2A. This suggests that an employee’s eligibility, in fact, needs to be determined with reference to Sec.4(1) read with Sec.2-A but not in isolation since Sec.2-A defines what is ‘continuous service referred in Sec.4(1) . Thus though technically, the eligibility is to be determined on the basis of continuous service of 5 years under Sec.4(1) but practically, the Act renders eligible an employee who completed 4 years and 8 months(240 days) or thereabouts. It being so, the view of Mr.Kamalkant finds support in the aforesaid legal provisions.
HR & LabourLaw Advisor
20th March 2013 From India, Mumbai
Yes---I do agree that technically speaking an employee earns continuous service on the date of completion of 240 days in the preceding 12 calender months w.r.to the date of termination on a/c of resignation.At the same time 5 yrs of continuous service has to be reckoned w.r.to the date of entry only.When the date of resignation falls on a day before the actual date of completion of 5 yrs, certainly he could not have completed 240 days in the preceding 12 calender months because every block of 12 calender months will have to be pushed back prior to the date of entry.Such an untenable approach will result in unwarranted anomaly. That is why I insist THAT the definition u/s 2A ,being for a different purpose, should not be read conjunctively with S4(1) because of the qualifying phrase " not less than five years."When the Law prescribes a condition by means of specific time or number or process or gender or category or class of people it has to be strictly observed according to the purpose and no humane approach emanating from tendencies of grace n compassion will have any room.
With kind regards n thanks again
21st March 2013 From India, Salem
Thanks for your enlightened response. While respecting your views on the issue, I am, for the following reasons, unable to persuade myself to subscribe to your view that Sections 4(1) and 2-A shall not be read jointly but independently.
1)Sec.2-A does not determine eligibility for gratuity. It only provides a formula to the employer to compute continuous service under two situations as envisaged under Sub-sections(1) & (2) of Sec.2-A.
2) The object of Sec.2-A is to ensure that an employee does not loose his claim for gratuity by literal interpretation of the expression ‘continuous service’ as it is not possible for an employee to be literally in uninterrupted service for a given period (say five years for example) in view of the contingencies of human life which require him to abstain from duty for various reasons like illness etc or his services are terminated before he completes a spell of 12 months. Thus it adopts a liberal interpretation having regard to the spirit and objectives of a beneficial legislation like Gratuity Act.
3)Sec.2-A does no more than this. It does not say that an employee is eligible for gratuity. There is not even a whisper about eligibility in Sec.2-A. No employee can stake his eligibility under Sec 2-A. An employee asserts his eligibility under Sec.4(1) only.
4)Once an employee submits his application for gratuity with details of the period of service in the relevant columns, the employer initiates the process of computation of his service period. I would like to refer to the following sequence of steps that take place from the stage of submitting application for gratuity till the making of decision to grant his gratuity to corroborate the view that both Sections 4(1) and 2-A complement each other to be read conjointly.
i) First step : Employee submits his application for gratuity with details of the period of service in terms of Rule (7) under Sec.4(1).
ii) Second step : Once the application is submitted, the scene of action shifts to Sec.2-A as under.
On receipt of application, the employer proceeds to satisfy himself whether the employee has completed five years or more by verifying the date of his joining and the date of resignation or retirement or termination as the case may be. He will verify whether the period is interrupted by any periods of break-in-service or if interrupted, whether the interruptions are permissible under law to ensure that the period is continuous. Thus this whole exercise is undertaken by the employer falls within the purview of computation of continuous service under Sec.2-A. It is inevitable for the employer to conduct this exercise as this is concomitant t o ascertaining g his eligibility u/sec.4(1).
iii) Once he is satisfied that the employee was in continuous service for 5 years or more, the employer upholds his eligibility under Sec.4(1) and grants his gratuity.
Thus the above procedural exercise, in my view, abundantly substantiates that Sec.4(1) and Sec2-A are as inseparable as the Siamese twins and need to be read conjointly only.
5) If it is so, the benefits of fictional service of one year under subsection(2) of sec.2A need to be allowed to employees in deserving cases.
However when there is a query seeking to know what is the qualifying service to be eligible to claim gratuity, the proper reply can be five years of continuous service but not four years and eight months.
22nd March 2013 From India, Mumbai
Thank u very much for ur meticulous n plausible explanation of the contents S.2A of the ACT. I am in complete agreement with u, no doubt.The stand- off arises only in the matter of reading together of Ss 2A n 4 (1).Right from the out-set what I am consistently saying is that conjunctive reading of both the sections should not be resorted to to cull out the meaning of the term 'continuous service' mentioned in S4(1) because of the qualifying phrase 'not less than five years' following it.Just we have to allow its literal meaning of 'the time lapse of five calender years'--- 'that's all.ON the contrary, the difference in the purpose n context of both the sections will certainly lead to confusion. Once the employee becomes eligible by virtue of his completion of 5 years of service under the same employer without break if any, causing cessation of employer-employee relationship, in case of his termination subsequently on a/c of any reason other than death or disability due to accident or disease, the aid of S2A comes into operation to ascertain whether he is entitled to gratuity for every year of his continuous service including the threshold first five years.
22nd March 2013 From India, Salem
i worked in a orgination 5 years and 2 month. now due to some reason we left the job.
but i asked to our employee they told me only be aplicable when strength of staff is 10 else less then 10 employee we are not eligible for pay gradutity.
please advice can i take gradutity.
compny is pvt ltd comply .
waiting your reply.
23rd March 2013 From India, Delhi
It is not binding on your company to pay you Gratuity as per law if the employee strength of your company is not exceeded 10 any time. You can only request the company for the Gratuity. It is up to the company whether to accept your request or not.
You said the strength of your staff does not exceed 10. it is not a strength of staff alone.
WISH YOU A GOOD LUCK!!!
23rd March 2013 From India, Mumbai
As a part of the statute and under the payment of Gratuity Act – 1972, all employees are eligible for gratuity. For payment of gratuity the effective period will be taken into calculation from employees’ date of joining.
Formula / Calculation basis :
For employees who have completed a total service of five years and above, gratuity will be calculated on last basic salary drawn divided by 26 multiplied by 15 and the whole amount to be multiplied by number of years service. (For this purpose 6 months and above can be rounded up to a full years service and less than 6 months need not be.)
For employees who have not completed a total five years of service, will be calculated on last basic salary drawn divided by 26 multiplied by 15 and the whole amount to be multiplied by number of year’s service. More than fifteen days working in a month will be considered for full month and less than fifteen days will not be considered for calculation. For e.g. an employee who has completed 3 years 3 months and 14 days of service, his / her gratuity will be paid for 3 years and 3 months (i.e. 3.25 years).
The booking of provision will be from the day employee joined the organisation and on monthly accumulation basis. (For booking of provision)
Gratuity shall only be payable to an employee on employees separation from the company for any reason mentioned below on above basis.
a) On employees termination, or
b) On retirement or
c) On resignation, or
d) On death or disablement due to accident or disease:
This will be effective from 1st April 2009.
Want to know whether Gratuity is Payable for less than five years of service term (as mentioned above) or not, if yes, the how & why it is payable as I have not claimed from two organizations-
1)ING Life Insurance Co
Have mentioned cos names because few of us must be knowing provisions about these two cos.
Please help me in getting Gratuity Payment if it is applicable.
26th March 2013 From India, Pune
I forgot to collect my gratuity from a co I left (resigned) in 2011 after 8 years & nine months, but
the gratuity was paid/collected shown in co's records which was not credited to any of my accounts.
Now employer is not co-operating for reconciling as they tell that records have been destroyed and why you contacted after so may years of gap. Even my Banker/Our Banker - Canara didn't extens help or due to their helplessness or due to any reason to give me my or co's account statement which can help me.
Please suggest me how to get to take corrective action.
28th March 2013 From India, Pune
I think ur erstwhile employer n yourself both are from Poone. To get ur gratuity pending, pl take the following steps:
1)Prepare a notice in' form I' IN DUPLICATE.
2) Send one copy to ur erstwhile employer by registered post with acknowledgement due
3) Retain the other copy of form I, POST OFFICE RECEIPT and AD card received back.
4) After 15 days from the date of service of ur notice, if reply received refuting ur claim for gratuity or no reply is received from the employer, prepare an application for direction in form 'N' IN TRIPLICATE and submit in duplicate to the Controlling Authority for ur area with the copy of form I, ADcard, reply if any, received from ur employer
5)A lso present an application for condonation of delay
Better engage a Counsel
28th March 2013 From India, Salem
The jurisprudence is about interpreting the provisions of law in such a way that they seem just and fair. As i already said and i strongly believe that while interpreting any beneficial legislation we should give the provision the most liberal interpretation possible so that so much it favour employee and also donot do unjustice with employer.
I am uploading a judgment of Madras High Court wherein Learned Justice S.M. Abdul Wahab has given a well reasoned judgment to the question of entitlement of gratuity.
I would like to request to the worthy members of the community to go through the judgment and examine the logic given by the Ld. Justice without getting into the technicality of territorial jurisdiction.
10th April 2013 From India, New Delhi