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Dear Seniors,
In case of retrenchment if the employee is retrenched before completing 05 years of continuous services then is the employee is eligible for gratuity if yes for how much period he is eligible for the gratuity?
Thanks in anticipation.
Best Regards,

From India, Pune
there is only one thumb rule in gratuity that is "paid only after completion of 5 years of service".
no matter what is the reason of leaving the organization may be termination / self resigned / retrenchment anything.

From India, Delhi
Nipuna, This your own opinion or do you have any supporting documents for your statement...?
From India, Pune
Dear Mr. Prashant,
As per Section 4 of Payment of Gratuity Act, 1972 Gratuity shall not be payable to an employee on termination of employment after he has rendered continuous service not less than 5 years.
It is also provided that completion of continuous service service of five years shall not be necessary where the termination of employment is due to death or disablement.

From India, Lucknow
It is not an opinion. It is indeed the legal position. As has been pointed out under Payment of Gratuity Act, Employee is eligible only on completion of five years. The only exception is death of an employee or cessation of employment due to disablement arising out of an employment injury.
Historically, Industrial Disputes Act was legislated in 1947 and Payment of Gratuity Act was legislated in the years 1972. Law makers in 1947 did not contemplate Gratuity. When Payment of Gratuity Act was enacted, Law makers intentionally did not include Retrenchment.

From India, Chennai
Then I think It is possible for an employer to evade Gratuity Liability by retrenching employees before completion ofsevice of continuous 05 years ?
From India, Pune
Dear Prashanth,

Will you please read Sec 2(oo) of the ID Act conjuctively with its Sec 25F? As i understand retrenchment is the act of an employer terminating the services of an employee for whatever reason other than as a punishment by way of disciplinary action subject to the conditions stipulated in Sec 25F. If you further analyze the four exceptional types of termination of employment of a workman occuring in clauses (a), (b), (bb) and (c) of Sec. 2(oo), you will find that the first one is purely on the volition of the workman, the second and the third as an automatic result of the contract of employment coming to an end and the fourth one, of course by the employer emenating from the impossibility of continuation of employment as a result of continued ill-health of the employee. So, an employer can resort to retrenchment for whatsoever other reasons. However, If the conditions stipulated in Sec.25F are not fulfilled, it will not be construed as 'retrenchment' and its legal cosequences you know well.The retrenchment compensation provided for under cl (b) of Sec. 25F is independent of other terminal benefits the workman is entitled to at the time of his retrenchment. Hence the entitlement of a retrenched employee to gratuity is to be decided only as per the provisions of the Payment of Gratuity Act,1972 not withstanding the hypothetical consideration,if any that but for the retrenchment the employee would have been in service. I,therefore, think that the assertion of Nipuna is correct and self-explanatory too.Hope, I've answered your second query also.

From India, Salem
Dear Mr Prashant
Evasion is unethical. Discussing about something unethical in an open forum like this may not be correct. I have personally handled a few retrenchment situations involving less than five years. Invariably, I have recommended payment of gratuity even for those employees with less than 5 years and the Managements have agreed to my recommendation.
Understand the spirit behind these legislations rather than understanding just the letter of the law. This surely will help in taking ethical decisions
If an organization really can not afford to pay, then it is a different issue. But trying to save some money evading law is unethical

From India, Chennai
Dear All,

I must appreciate Prashant for asking a good brainstorming query on Industrial Disputes Act. In another query, he has expressed his apprehension that it is possible for an employer to evade Gratuity Liability by retrenching employees before completion of 5 years of continuous service.I am totally disagree with him on this point,reason being that Industrial Disputes Act has very well covered such cases, where the employer restore to retrench his employees.Chapter VA (where an industrial establishment employing less than 50 workmen) and Chapter VB (where an industrial establishment employing less than 100 workmen) deals with the conditions,which makes it mandatory for an employer to follow before restoring to retrenchment his employees.One of the conditions is that the workman will be entitled to receive, at the time of retrenchment,compensation equivalent to fifteen days' average pay for every completed year of continuous service or any part thereof in excess of six months.You will agree that the Legislators have very well thought on your apprehension and incorporated the clause so that an employer does not evade the liability.This benefits is in addition to the payment of gratuity if he fulfills the eligibility criteria of five years under the Payment of Gratuity Act,1972. My colleague Sh Umakanthan.M has also explained the implication of retrenchment.

BS Kalsi

Member since Aug 2011

From India, Mumbai
Dear prashant
Actually after complete 5 years, but there is an option if a person died in factory accident after 4 years 6 month his nominee can get graduity . Why I am telling because a case has been held in 2011 in Chennai court.

From India, Pondicherry

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