AnonymousHi All, I need your advice on how the Completed Years of Service are calculated for Gratuity Calculation.
I have a case where an employee joined the company on 18 Jan 2008 and his last working date was 15 July 2021 (so his effective service period is 13 YEARS 5 MONTHS 28 DAYS). As per the usual calculation, the total completed years of service is showing 13 Years (as the remaining period is less than six months). However, the employee is contesting that as per the gratuity act, it should be considered 14 YEARS as he has met the criteria of working more than 120 days in the last '5 Month 28 Days' period.
Can someone please confirm if it should be 14 Years? Is there any court ruling or any clarity on these type of cases?
From India, Pune
nanu1953The question raised by the employee is quite interesting. I have never faced such issue in my career. Straight calculation indicates 13 years completed service as well as 5 months 28 days service on 14th year. As per normal gratuity calculation it appears to pay 13 years gratuity. But as per definition of continuous service in 14th year the employee has been worked for more than 120 days in the span of 5 month 28 days.
Both are appears logical. We are usually not calculating years of service the way employee has calculated. God knows what will be the interpretation of the appropriate authority. Requesting others to give their valuable views.
S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions
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From India, New Delhi
Madhu.T.KAs pointed out by SK, it is a question which may involve different interpretations. I believe, since the employee has not worked for MORE THAN SIX months in the last year the 14th year should be ignored. It is true that for deciding continuous service, each year of 12 months should have at least 240 paid days and similarly the same in 6 months should have 120 days. But for calculating the amount of gratuity what is required is the length of service and when the Act says that a service " in excess of six months" shall be rounded off to one year, it does not mean that 120 days within a period of six months shall account for one year.
From India, Kannur
KK!HRThe answer to it lies in an analysis of Section 2 (A) (2) with Section 4 (2) of the PGA 1972.
The Charging section states that gratuity @ 15 days wages is payable for every completed year of service or part thereof in excess of six months. So it is quite unambiguous that it has to be in excess of six months.
Now coming to Section 2 (A) (2 (b) the deeming provision is that if the employee 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 not less than -
(ii) one hundred and twenty days, then it amounts to six months of continuous service.
So at best it is only six months service and hence it falls short of being in excess of six months service.
From India, Mumbai
AnonymousHi Nanu, Madhu and KK,
Thanks for your views on the above query. The case is quite peculiar. As KK pointed out, the service period in the last 5 months 28 days is counting to be exactly 128 Days. If we go strictly by the definition of the Gratuity act (copied below), the "part thereof in excess of six months" language gets validated in the above case if we consider six months as per the definition of Section 2A (120 days).
"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."
I believe this may be a fit case of legal interpretation in case a dispute gets raised. Request your views on this further