Legal Analyst, Hrm
Korgaonkar K A
Assistant Engineer, Indian Telephone Industries,
Executive Ir And Admin
Data Entry Operator
You are entitled for gratuity, as 240 days or more of service in the last year of service is counted as full year. So, having rendered 4 years & 11 months of service, you are eligible for gratuity equivalent of 5 years of service.
30th June 2015 From India, Delhi
2nd July 2015 From India, Kolkata
As already told to you by Mr. Dhingra you are eligible for gratuity. It is true that one need to complete 5 years of continuous service to be eligible for gratuity. However if we see the definition of a continuous service it says that 1 continuous year comprises of 240 days of service. So when you completed 4 years and 11 months you passed the eligibility.
This ratio is given in the Madras High Court Judgment of Mettur Beardsell Ltd. Vs. Regional Labour Commissioner. wherein Justice S. M. Abdul Wahab settled that one who completes 4 years and 240 days is eligible for gratuity.
Now coming to the query of Mr Sougat Das, even if a company works for 22 days a month the gratuity shall be calculated by dividing it by 26. The formula is given below
Gratuity Calculation= [ (Basic Pay + D.A) x 15 days x No. of years of service ] / 26
Where, D.A = Dearness Allowance.
lets see an example
Calculate gratuity amount, given Basic Pay = 17500, DA = 1500 and Years of Service = 25
Gratuity = ( ( 17500 + 1500 ) * 15 * 25 ) / 26
= ( 19000 * 375 ) / 26
= 7125000 / 26
Therefore, gratuity amount is 2,74,038.461
and if you divide the same by 22 the amount of gratuity shall be
=7125000 / 22 = 3,23,863.64
Wish is all yours i will not stop you from paying at higher rate and neither do Gratuity Act. Under Section 4 Sub Section 5 it is given that and i quote "Nothing in this section shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer.".
So if you want to give more you are most welcome. However mind it, if you tried to pay Gratuity on higher side that shall become customary and you will have to pay the same in the same fashion to others too. Hope that clears your Doubts. Feel free to revert if any further query.
15th September 2015 From India, New Delhi
According to some of the learned members, Gratuity is not payable on 4 years & 11 months service but according to some learned members including Advocate Mr. Kamal Kant Tyagi and very senior member, Expert & Legal Analyst Mr. P S Dhingra, Gratuity is payable on 4 years & 11 months service.
By way of appreciating the responses in this thread, only one learned member kumaracme voted in favour of gratuity is not payable on 4 years & 11 months service but 4 learned members voted in favour of gratuity is payable on 4 years & 11 months service.
I am confused. What is the correct answer?
This forum has discussed this topic many occasions with different views altogether. There is no conclusive answer to this query. Given below is a link of one of the threads on similar topic. I request the learned members including Advocate Mr. Kamal Kant Tyagi and very senior member, Expert & Legal Analyst Mr. P S Dhingra to make comments once again in light of the below given link.
In present thread the initiator of the thread is from Mumbai, seems to be from his profile.
15th September 2015 From India, Mumbai
At least 5 years service- Continuous
Continuous service means:
An employee shall be said to be in continuous service for a period if he has, for that period, been in uninterrupted service and includes service which may be interrupted on account of sickness, accident, leave, absence from duty without leave, 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.
Where an employee is not in continuous service for any period of one year or six months, he shall be deemed to be in continuous service under the employer:
if for the said period of one year he has worked for one 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 two hundred and forty days in any other case;
if for the said period of six months has actually worked under the employer for not less than 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 one hundred and twenty days, in any other case;
The number of days on which an employee has actually worked under an employer shall include the days on which:
he has been laid-off under an agreement or as permitted by standing orders made under the Industrial Employment (Standing Orders) Act, 1946 or under the Industrial Disputes Act, 1947 or under any other law applicab1c to the establishment;
he has been on leave with full wages earned in the previous year;
he has been absent due to temporary disablement caused by accident arising out of and in the course of his employment and
in the case of a female, she has been on maternity leave; so, however, that the total period of such maternity leave does not exceed twelve weeks.
In case of employees in seasonal establishments he shall be deemed to be in continuous service for any period of one year or six months if he has actually worked for not less than seventy-five per cent of the number of days on which the establishment was in operation during such period.
In my interpretation, person has to complete five full years of service out of which if he worked 240 days in last year he should be entitled for gratuity.
15th September 2015 From India, Pune
I have not come across any Supreme Court Decision on the eligibility of Gratuity. Even the Controlling Authority under Payment of Gratuity Act rely / refer to the Madras High Court Judgment of Mettur Beardsell Ltd. Vs. Regional Labour Commissioner. Justice S. M. Abdul Wahab delivered a great judgment, which is totally clear and just interpretation of the provisions of the Act. When i read this Judgment for the first time, the eligibility became crystal clear to me. Four years and one continuous year in fifth year. True if one continuous year is 240 days of work than 240 days worked in 5th year must be the eligibility for Gratuity. Nobody disagreed from it hence it never went past High Courts. Mettur Beardsell Ltd. Vs. Regional Labour Commissioner is a Landmark Judgment and currently the Law of the Land. So i strongly suggest to read the judgment it will clear any doubt any body may have.
One more thing 240 days are not 240 working days it includes weekly off (whether One or Two in some companies), Paid Leaves, Holidays, Lay offs and Legal strike days for which payments are made to workmen. So legal world is unambiguously rely on this judgment and by relying on this there is nothing wrong legally. Think from your own judicious mind. Gratuity is a beneficial legislation and we will have to give it the most liberal and just interpretation when it comes to giving any benefit to workmen under this Act.
Hope this clears any doubt in the minds of worth members.
16th September 2015 From India, New Delhi
16th September 2015 From India, Mumbai
What do you think what courts do. Courts interpret what is given under the Act. They do not makeup something just to resolve some dispute. The interpretation given by courts are the Law of Land. Mettur Beardsell Judgment is widely accepted and relied upon by authorities. Please do not confuse the members here. If you want to say something please give some reference or strong bases for that.
17th September 2015 From India, New Delhi
240 days concept is not something applicable after eligibility of five years. Can you share some Provision or Case Law to support what you said in your post.
Please i again request do not make frivolous comments that are not based on some concrete legal facts. Just to apprise you after five years if a person who works even 6 months that is just 180 days in an year is entitled for the gratuity for that whole year. 240 days are way ahead. Please read the Act in its entirety. This is given under section 4 sub section 2 and the same is reproduced for your information below:
(2) For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days' wages based on the rate of wages last drawn by the employee concerned :
Please do not confuse other members. If you want to ask something just ask straight away and if you want to share something please check thoroughly if is correct what you are sharing. Half and wrong information is always dangerous.
17th September 2015 From India, New Delhi
If there is any issue which has not been decided by the High Court of that state, other State's High Court's Decision has persuasive value. In the same State the judgment the decision is binding in principle. So in short if there is no contrary judgement on a given point from your High Court then the other High Court Judgment will prevail as a Law of the Land. Supreme Court Judgment will prevail over all high court judgments on the same point of law. Hope you got your answer.
17th September 2015 From India, New Delhi
18th September 2015 From India, Nellore
Thanks for your spontaneous response to my query.
I have now another query. I would like to ask you with due respect to you sir, to clear the ambiguity in this subject.
I am from Mumbai. If I deny gratuity to an employee who has put service of 4 years and 240 days in fifth year, will it be a contempt of court or a breach of law?
This question arose in my mind on your above response saying "if there is no contrary judgement on a given point from your High Court then the other High Court Judgment will prevail as a Law of the Land". In Mumbai HC, to my knowledge, there is no contrary judgement.
18th September 2015 From India, Mumbai
Whatever lit bit I know about law,is that Tamil Nad HC judgements are applicable or a precedent only for lower courts of TN.
Other courts in different states can quote it but it does not have force of law.
Ratio decidendi applied by one HC may not be seen in same way by other HC.
18th September 2015 From India, Pune
There is a confusion going through the applicability of Minimum wages while calculating EPF Contribution. Some of the enforcement officers of EPF Office insisting that contribution has to be remitted on the salary of Rs.15000/- (though the basic + DA is less than 15K). Enforcement wing has issued orders worth of crores of rupees to the member companies for compliance of their orders.
The EO (Enforcement officer) suggest the following model of workings while calculating EPF.
If an employee getting > 15K, applicable salary is (15K - 40% of 15K which is HRA) all other allowances has to be
taken for EPF Salary.
If he get < 15K salary ( salary - 40% of 15K which is HRA) to be calculated as EPF Salary.
Now, the question of what constitutes Basic + DA has been flouted by EO. Is it right on the part
of EPF Office to collect such a huge sum as omission of wages ?
Kindly inform us whether such orders has to be obeyed, is there any legal remedy over this ?
18th September 2015 From India, New Delhi
It seems, you have not read my various posts including in this particular thread, minutely.
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18th September 2015 From India, Mumbai
Congratulations for getting Gratuity from your employer on your service less than completed 5 years.
I suppose, you are not from Chennai or Kerala State.
Your employer has paid you Gratuity even for your services less than 5 years, it does not mean that you are entitled to get it legally. I do not wish to write any thing more on this subject. We are here on this forum to discuss the provisions of Law and not practice of Law. Any employer is free to give you any thing more than Law.
21st September 2015 From India, Mumbai
22nd September 2015 From India, Kolkata
22nd September 2015 From India, Delhi
Pratik has already got his gratuity. Many learned members have given guidence to him up till now, as what to do. What "guidense" you will give to him now?
I am aware that this is an open forum and any one can write any thing in this forum.
Of late, I started feeling that member like me should stop writing in this forum and prevent himself from degrading.
22nd September 2015 From India, Mumbai
Sorry to ask you direct question.
How you are indifference in reply on same quesion in two saperate threads.
This particular thread, you are saying gratuity is payable even for service less than 5 years. In another thread you said, the employee must complet 5 years.
My advise to you, please read the comments of other learned members and appreciate their views or else, keep yourself mum. If you have different view of your own, please put it logically instead of asking the member to contact you on phone.
22nd September 2015 From India, Mumbai
Sorry to address your query a little late as i was away from my Laptop for sometime. Now coming to your query. In order to look into this we have to understand the history of it. This confusion started by a judgment of MP high court of Montage-Enterprises-Pvt.-Ltd-versus-Employees-Provident-Fund wherein the Honb’le High Court dismissing the petition and stating that the allowances are part of basic wages as defined under the definition of wages given under the act. I guess PF department on the basis of that judgment issued a Circular dated 20 November 2012. On page 4 of that circular the basic wages was elaborated under the head Splitting of Wages. In it, it was told that and allowance uniformly paid to the employees shall be construed as basic wages and the employer and employee have to contribute on the amount so arrived by adding all those allowances to the basic wage. Business world got stunned by this as many companies were already splitting their wages structure and keeping the basic wages low to keep their contribution down and due to this circular a big whole was about to open into their pockets as in most of the cases their basics were not even half of the actual salaries. Also as 12 percent had to be contributed by employees their net take home was to take the hit too.
This Circular was kept in abeyance by EPFO itself as the companies moved to court against various circulars. In one such case i. e. G4S Securities judgment of Punjab and Haryana High Court, it was kept in abeyance through circular dated 2 December 2011 as Punjab and Haryana High Court differing from the judgment of MP High Court gave decision in favour of Employer. All such matters moved to Supreme Court and the Supreme Court while passing an interim order dated 12 April 2013 in Surya Roshni Case directed that
“We,however, add that the Provident Fund Commissioner may proceed to make the assessment but no demand will be raised thereon.”
So the authorities may make an assessment under proceedings under section 7A, however they cannot raise any demands. The order is also attached for your reference. To my knowledge the position has not been changed yet so you may ask the authorities to issue an order to if they want you to remit contribution as they want. That is not possible as that will be direct contempt of the Supreme Court. So my opinion keep remitting the way you use to pay the dues till the disposal of the case in Supreme Court. However make a reserve as if the PF authorities won the case you not get burdened if that applied with retrospective effect. Hope you got your answer.
22nd September 2015 From India, New Delhi
Thank you for the detailed discussion on this issue. Till now we are contributing towards Provident Fund on Basic wages and DA. But due to recent developments, I was in confusion on the component of wages that attract PF contribution. I am happy, if I get some more information on this issue.
23rd September 2015 From India, Bangalore