Is It Common for Companies to Offer Gratuity After Just 3 Years of Service? Seeking Insights and Updates

Hi friends,

I recently learned that while recruiting a candidate for our automobile industry, he received gratuity for only 3 years of service in his previous company, despite the standard requirement of 5 years. I would like clarification on whether there are other companies that provide gratuity for 3 years of service. Additionally, please update me on any new amendments regarding gratuity.

I kindly request a prompt response.

Thanks & Regards,
Vishnu
09867348720

Hi Vishnu,

It may be possible that he was terminated by his previous employer, and that is why he received the gratuity before completing 5 years of service.

Regards,

There are three possibilities. The company might have paid gratuity in sheer ignorance of the Gratuity Act. Otherwise, the company might have paid it graciously, taking into consideration the loyal service given to the company by the employee.

Yet another possibility, which I feel is that the company might have deducted the gratuity amount from the salary of the employee on a monthly basis. It may happen that when the offer is prepared, the company will show the figure including the gratuity (the CTC!!!) as gross salary and later deduct the same from the salary to arrive at the net salary. If an employer deducts an amount other than that mentioned in section 7 of the Payment of Wages Act, that amount will be treated as a fund refundable when the employee leaves the organization due to any reason.

It is very common nowadays that employers include gratuity in the total package so that the amount 'offered' will be very high. If an employee is not paid the amount offered as salary and if the amount deducted does not conform to the permissible deductions such as PF, ESI, fines, absence from duty, etc., the employer should refund the amount deducted from the salary.

Thus, even in the case of termination, gratuity will not accrue if the length of service is less than 5 years. A 5-year qualification is not required only when the payment is to be made to the legal heirs of the employee on the happening of the death of the employee.

Regards,
Madhu.T.K