Gratuity Eligibility: Does 4 Years and 10 Months of Service Qualify for Benefits?

Dear All,

If an employee has worked for 4 years and 10 months, is he eligible for gratuity or not? Please reply, and if possible, provide relevant proof for the same.

Regards,
Parvez Pasta

Hi,

If an employee has completed his 4 years and 10 months of service in a company, is he eligible for Gratuity or not? Please reply with some documentary proof if possible.

Regards,
Parvez Pasta

Dear Parvez,

I am attaching a document to provide a better understanding of the same.

Regards,
Vipin

Hi,

Can anyone highlight the recent launch of LIC Gratuity Policy and whether it is beneficial to employers?

Please see, I hope you will reach a solution.

<strong>THE PAYMENT OF GRATUITY ACT:

Please see the award by Mardra High Court.

Please see the Award by Mardra High Court.

Dear Anurag,

The attached file is not opening.

Regards,
Parvez.

Dear Anurag and Vipin,

Please copy that file and paste it in the text. That will be better for me to read.

Regards,
Parvez.

Hi,

I have recently attended a seminar on the latest trends and techniques of HRD, wherein we were informed that in the case of regular employment, an employee is eligible for the payment of gratuity if he/she has completed 240 days of employment. This is applicable when gratuity is shown as a part of CTC to the employee. Since gratuity is paid as a goodwill token, it should never be part of the CTC of the employee.

I would appreciate it if you all could shed some light on the above-mentioned information.

Regards, Savita

Dear Parvez,

It is advisable to go through the Payment of Gratuity Act. The same act states that if an employee has served for 4 years and 240 days, he/she is entitled to Gratuity payment.

Regards,
Amit Anand Gera
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09818280505

Hi Parez,

An employee would be eligible for gratuity only after completing 60 months in one organization. An organization, at its discretion, can provide gratuity before completing 60 months.

Regards,
Santosh:)

Dear Friend,

Yes, he is eligible for that. In this case, we have to consider 10 months as a year because he has already worked more than 4.5 years, according to the law.

If you refer to the act, it was clearly mentioned under the heading continuous service that 240 days need to be considered if he is leaving the service in between the 5th year.

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 treating the absence as a break in service has been passed in accordance with the standing order, 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 an employee employed below the ground in a mine or in an establishment which works for less than six days in a week; and
(ii) two hundred and forty days, in any other case;
(b) for the said period of six months, 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:
(i) 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
(ii) one hundred and twenty days, in any other case.

Explanation: For the purpose of clause (2), the number of days on which an employee has actually worked under an employer shall include the days on which:
(i) he has been laid-off under an agreement or as permitted by standing orders made under the Industrial Employment (Standing Orders) Act, 1946 (20 of 1946), or under the Industrial Disputes Act, 1947 (14 of 1947), or under any other law applicable to the establishment;
(ii) he has been on leave with full wages, earned in the previous year;
(iii) he has been absent due to temporary disablement caused by an accident arising out of and in the course of his employment; and
(iv) 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.

(3) Where 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 for such a period 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 that period.

Dear Parvez,

In this case, you have to pay gratuity for a period of five years. One of our Hon'ble High Courts has already made a judgment on this point: if an employee completes 240 days of continuous work in the fifth year, then the employee becomes entitled to a gratuity amount. Therefore, if the employee is eligible for gratuity by remaining in continuous service for four years and has also worked for 240 days in the fifth year (i.e., in the preceding twelve months), then the employee becomes entitled to have a gratuity amount. This judgment seems to be on the same footing as we consider in cases of the Industrial Disputes Act, 1947, for service matters.

Submitted as requested.

Regards,
R.N. Khola
Senior Associate
Skylark Associates
Gurgaon

Hi,

An employee must have completed five years of continuous service to be eligible for Gratuity. When calculating the gratuity, you have to consider 5 years and 7 months as 6 years.

MANOKAVIN

Yes,

The calculation is based on 5 years, where 240 days of physical presence should be maintained in a year. If someone has completed 4 years and 10 months, and within those 10 months, there is a physical presence of 240 days, then the service period will be considered as 5 years. There is also a court ruling on this matter which I can provide.

Regards,

Dinesh C. Sharma

Dear,

I do not agree with Mr. Khola. If the Madras High Court has given judgment in one case, it does not mean an amendment in the Gratuity Act. The applicability clause of the Gratuity Act is still five years. So, no one is entitled to gratuity before five years of service except in death cases.

Thanks,
J. S. Malik

For Calculating Gratuity

#last drawn monthly salary as on date is taken into account

# if total period served with the current employer is less than 5 years no gratuity is payable to any individual

# for calculation of gratuity period served at a stretch with one employer is counted

# salary includes only basic pay and dearness allowance

# only commission on salary paid on turnover basis is included

Note

Gratuity is a lump sum amount that your employer pays you when you retire or resign from the organization. An Employee does not contribute any portion of his salary towards this amount.

Gratuity is paid out at the time of superannuation (if you retire at the age of 58), when you retire (at any other age) or resignation, and in the event of your death or being rendered disable because of an accident or illness. You need to have at least five full years of service with an employer to qualify for gratuity. This rule is relaxed in the last instance. In the event of your death, the gratuity will be paid to your nominee.

CASE-1 You are covered Under the Payment of Gratuity Act, 1971:

Gratuity shall be calculated as per the below formula:

Gratuity = Last drawn salary x 15/26 x No. of years of service

Your last drawn salary will comprise your basic + DA. For computation of gratuity, your service period will be rounded off to the nearest full year.

CASE-2 You are not covered Under Payment of Gratuity Act, 1971

Gratuity shall be calculated as per the below formula

Gratuity = Last drawn salary x ½ x No. of years of service

Your last drawn salary will comprise your basic + DA+ commission on sales on turnover basis. For computation of gratuity, your service period will not be rounded off to the nearest full year. While calculating completed years, any fraction of the year will be ignored. For instance, if the employee has a total service of 20 years, 10 months and 25 days, only 20 years will be factored into the calculation.

GRATUITY EXEMPTION:

Death-cum-retirement gratuity received by employees of central or state governments and local authorities is exempt without limit.

Gratuity received under the Payment of Gratuity Act, 1971 is exempt to the extent that it does not exceed 15 days' salary for every completed year of service calculated on the last drawn salary subject to a maximum of Rs 3.5 lakh.

Any other gratuity is exempt to the extent that it does not exceed one half-month salary's for each year of completed service calculated on the basis of average salary for 10 immediately preceding months subject to a maximum of Rs 3.5 lakh.

The ceiling of Rs 3.5 lakh applies to the aggregate of gratuity received from one or more employers in the same or different years.

Hope that answers your query

Regards

Charu

Yes, Mr. Amit Anand Gera, you are absolutely right. Through some reliable sources, I have also obtained the judgment of the Supreme Court stating that if an employee has completed 4 years and 240 days in one organization, they are eligible to receive gratuity. Please see the attached file for more information.

Regards, Parvez Pasta.

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Hi,

In some organizations, Gratuity is part of their CTC. So now, in this case, whatever the gratuity amount shown in CTC, a total of that will be given to the employee after he/she completes 5 years of service. If yes, then in this case, the gratuity formula will not be applicable?

Eg: If my CTC is ₹2,40,000 per annum, which includes a gratuity amount of ₹800 per year. Then how will my gratuity calculation be done if I complete 5 years with the same company?

Kindly guide me...