Is It Compulsory To Give Gratuity Amount? - PDF Download - CiteHR
Korgaonkar K A
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Private Consultant On Labour Laws
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Dear all,
Company is - Pvt. Ltd
Domain : IT-Software
one of our employee claimed for gratuity amount....
He has completed 6 year and going to resign in next month
so Is it compulsory to give gratuity amount ??? .
Company is liable for that ?

Gratuity payment is covered under a Statute & hence there is no discretion for a company to pay or not to pay gratuity. It has to be calculated & paid as per Gratuity act.
Pls follow all labour laws, unless you have taken exception from concerned authorities for your co., which is very unlikely.

Dear Rakesh,
If an employee completes 4 years and 240 days service and the employer has 10 or more people working under him the gratuity need to be paid mandatoryly. The calculation formula is given below for your ease.
[(Basic + DA) * number of years * 15]/26
Any portion above six months shall be considered as a year and less than 6 months shall be dropped.
In case of death of an employee even if he did not completed minimum working days his nominee shall get the gratuity for whatever time he had worked.
Feel free to revert in case of any further clarification.

Dear Rakesh, For eligibiliity, the concern employee must complete 5 years, not 4 years & 240 day in fifth year.
Dear Mr. Dinesh,
Would you please share some incident or case law wherein anybody has been denied gratuity for only completing 4 years and 240 days and not completing 5 years?
Because as far as i am told by one Assistant Labour Commissioner 4 years and 240 days is the minimum eligibility period for claiming gratuity.

Dear Mr. Tyagi,

For getting eligiblity of gratuity, 5 years service is must ,however if any company gives gratuity after completing 240 days in fifth year than it is ok and indiviual is entitle to get it but Gratuity act clearly mentioned in applicablity clause that gratuity is applicable only after completion of five years.Legally 5 years service is must to become eligible for the same.

Gratuity act of Section 2A, continous service definition is given,

Section: 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:

So gratuity is applicable only when you complete 5 years and continuous service definition can be taken into account only when you are denied for payment by the company after completing 5 years. 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:



Dear Rakesh,
In my opinion, the IT companies are covered under Shop and Establishments Act as the definition of "commercial establishment" includes a trade,business or a profession.While going through Delhi Shop & establishments Act, I have come across a list of establishment/shops where the Govt of NCT of Delhi has granted Exemption under Section 4 from the operation of Section 11(Spread over),14(Young persons and women to work during day time),15 (Opening and closing hours of shops & establishments) &16 (Close day) of the Act to all establishments pertaining to IT enabled services and IT industries where IT industries includes IT hardware & software.
In view of the above explanation,I feel as the Payment of Gratuity Act is made applicable to every shops & establishments and employee, you have mentioned, has competed a period of 6 years hence he will be eligible to claim for the payment of gratuity.
The views of the seniors are welcome.
BS Kalsi
Member since Aug 2011

Dear Dinesh,

It is true that for claiming gratuity an employee has to complete 5 years of continuous service under the same employer under the Payment of Gratuity Act,1972.

Section 2A of the Payment of Gratuity Act defines "Continuous service" which stipulates that an employee shall be said to be in continuous service the said period of one year, if the employee during the period of twelve calendar months preceding the date with reference to which calculations is to be made, has actually worked under an employer for not less than two hundred and forty days.

Sh Kamal Kant Tyagi is not wrong in giving emphasis on completion of 4 years and 240 days service for the eligibility of gratuity.

As per the the decision of Madras High Court, if the eligible employee has completed 4 years and 240 days in the fifth year continuously then he/ she must be deemed to have continuously served for one year and therefore it is deemed that he/ she has completed five years and therefore would be eligible for gratuity.

I have a question "don't you think that we need to calculate 240 days of actual working for all the 5 years instead of 240 days in the fifth year as mentioned by Hon'able Madras High Court in the above quoted judgement.

The seniors are requested to through light on this aspect.

BS Kalsi

Member since Aug 2011

Dear all,
the 240 days are required to be deemed as continuous service for each and every year of service.
If it is the case, the same rule can be applied in the fifth year also to fix as continuous service.
The same has been viewed in the madras hc judgment.
excellent hr services,


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