Am I Eligible for Gratuity After 4 Years and 10 Months? Seeking Advice on Timing

Hi,

I have completed 4 years and 10 months in an organization, including the notice period. Could you please advise if I am eligible for gratuity? If so, how much time does it take to credit the benefit?

Thanks

Hi Mr. Malik,

One thing you are missing here is that anything more than 8 months (240 days) will be deemed as a year for Gratuity payment purposes. So, Vijay, in your case, you are eligible for the payment of Gratuity.

Regards,
Sid

Dear Sid,

Can you please tell us under which section of the Gratuity Act it is written.

Regards,
J. S. Malik

Dear Sid,

Mr. Malik and I both have the same question for you. Can you tell us under which section of the Gratuity Act it is stated?

Regards

Dear All,

I agree with Mr. Malik. Gratuity is applicable after an employee completes 5 years of continuous service.

1) If an employee completes 5 years and 6 months, then they are entitled to 6 years of gratuity.
2) If an employee completes 4 years and 10 months, then the employee is not entitled to gratuity as they have not completed 5 years of service.

Please refer to Sec 2(e).

Regards,
Nimish Joshi

Hi,

To become eligible for gratuity payment, you must have served for 4 years and 240 days. During this period, there should not have been any salary deductions due to leave without pay.

Regards,

5 years of continuous service is mandatory. If a person completes 5 years of continuous service and thereafter provides more than six months of service, it shall be treated as one full year. For example:
- 5 years & 7 months = 6 years
- 5 years & 5 months = 5 years
- 5 years & 6 months = 6 years
- 4 years, 11 months, and 29 days = not eligible.

Dear,

I agree with Mr. Malik; it is clearly written that eligibility is only after completion of 5 years of continuous job in the same organization. After the completion of 5 years, there may be consideration of 6 months as one year, but 5 years have to be completed.

Best Regards,

Sajid Ansari
Delhi

Thanks, I am getting mixed responses here. What I have gathered from the act is that every year, 240 days should be served in 5 years to be eligible.

HRSSonepat: Do you know of a case where gratuity was paid for 4 years 240 days or more but less than 5 years?

Hi,

As per the Gratuity Act, an employee becomes eligible for the payment of gratuity only upon completion of five years of continuous service (i.e., there should not be any break in service). Therefore, I agree with the views expressed by Mr. C.N. Jayaanandh.

Hello seniors,

However, the Madras High Court has held that an individual who has completed 4 years and 240 days in an organization is eligible for gratuity.

Right now, you are not eligible for gratuity. Gratuity is payable only after completion of 5 years of service, after termination of service on superannuation, death, or disablement. The minimum eligibility of 5 years is not applicable in the case of death and disablement.

Dear Sir,

If the company feels that gratuity can be given to him on completion of 4 years and 10 months, can that be done?

Thank you.

Dear Mr. J. S. Malik,

Sir,

Under The Payment of Gratuity Act-1972, Section 4 states that gratuity shall be payable to an employee upon the termination of employment after he has rendered continuous service for not less than five years.

Now, I would like to highlight the definition of continuous year of service. According to Section 2A, an employee is considered to be in continuous service for a period of one year if the employee has actually worked under the employer for not less than 240 days during the twelve calendar months preceding the date for which the calculation is to be made, or 190 days for seasonal or mine establishments.

Therefore, if an employee has worked for four years and in the fifth year has rendered services for at least 240 days, he will be deemed to have rendered continuous service of five years, making him eligible for gratuity.

Furthermore, the gratuity amount is calculated as 15 days of average last drawn wages for every completed year of service, as per Section 2(b). A completed year of service refers to a continuous year of service or part thereof in excess of six months.

The definition of six months states that an employee is considered to have rendered six months of service if they have worked for 120 days in the last six months.

For example, if an employee has worked for five years and six months, they will be entitled to six years of gratuity, not just for five years (refer to Section 4(2) of The Payment of Gratuity Act 1972).

Any suggestions will be highly appreciated.

Thank you.

Mohd. Arif Khan

Dear Deepa,

The court gives various judgments, and the Madras High Court has made a decision. However, after that judgment, there has been no change in the applicability clause of the act, so it will remain at 5 years.

Regards,
J. S. Malik

Quote from Deepayadav: Hello seniors, but the Madras High Court has held that one who has completed 4 years and 240 days in an organization is eligible for gratuity.

There has been a ruling of the Supreme Court in this regard. At present, I do not have the same, but I have the Madras High Court ruling which vindicates the same.

For the information of all members, I am sending herewith the clipping of the judgment issued in this respect where 4 years & 240 days are held valid for gratuity payment.

This issue has already been apprised and discussed on this platform. Members are requested that before putting up their questions, they should go through the earlier posts brought on this platform to save their valuable time.

Regards,
Regards,

Dear Mr. Malik,

There is no need to change the Act; everything is covered in the Act. Please read Sec. 2A and Section 4 to interpret the law.

It is a well-settled law that if an employee has completed 240 days in the fifth year, they will be eligible for gratuity payment. There is no confusion on this subject. There are various judgments of the Apex Court on the same, and the Expert also shares the same view. The definition of continuous service under section 2A is self-explanatory. Please read it along with Section 4. Whenever the term "completed year of service" is mentioned in the Act, it actually refers to continuous service, which is 240 days in the preceding 12 months.

There is no need to focus only on 5 years; actually, 4 years and 240 days also qualify as 5 years as defined in section 2A of the Act. The term we use, "YEAR," has a specific definition under the Payment of Gratuity Act.

All acts have different definitions for employees, wages, and years. Similarly, the completed year is referred to as a continuous year, which is defined as 240 days worked in the 12 months before the date of reference for calculating gratuity.

Thank you,
Mohd. Arif Khan
9891578605

Dear Mr. Malik,

I understand your interpretation, but based on this interpretation, no one pays the gratuity because the applicability clause states five years. Even if you have insured your gratuity through LIC, they also pay after the completion of five years.

Suppose as an employer, I am not paying it before the completion of five years because it is written in the applicability clause. What is your choice, go to court? Practically, no employer is paying before five years, and no one is interested in the definition of continuous service.

Regards,
J. S. Malik

Dear Mr. J. S. Malik,

Parawise reply.

Applicability clause written as five-year Continuous Service (Mind it).

Insurance of Gratuity is not mandatory. We are discussing here facts of the Act.

If an employer is not paying, he is violating the Law.

Court is the ultimate authority to interpret the Law.

All professionally managed establishments are paying gratuity considering the fact and definition of Continuous Service. Since you have asked for the section of the Act, therefore I have mentioned my above posts.

As a last note, Being an HR professional, I can never give such a comment as you have mentioned:
"practically no employer is paying before five years and no one
is interested in the definition of continuous service."

We as HR Professionals have to provide correct information; it depends upon the members of this site whether they are following it or not. Once again, it is true in the light of the Act and in practice, that 240 days in the fifth year of service of an employee make him entitled to payment of Gratuity.

Always read the Act and supported material before commenting on it. Seek the opinion from expert practitioners of the subject.

Thanks,
Mohd. Arif Khan

Dear Mr. J. S. Malik,

Parawise reply.

Applicability clause written as five-year Continuous Service (Mind it). Insurance of Gratuity is not mandatory. We are discussing here facts of the Act. If an employer is not paying, he is violating the Law. Court is the ultimate authority to interpret the Law. All professionally managed establishments are paying gratuity considering the fact and definition of Continuous Service. Since you have asked for the section of Act, therefore I have mentioned my above posts. As a last point, Being an HR professional, I can never give such a comment as you have mentioned:
"practically no employer is paying before five years and no one is interested in the definition of continuous service."

We as HR Professionals have to give the correct information; it depends on the members of this site whether they are following or not. Once again, It is true in the light of the Act and in practice that 240 days in the fifth year of service of an employee make him entitled to payment of Gratuity. Always read the Act and supported material before commenting on it. Take the opinion from expert practitioners of the subject.

Thanks,
Mohd. Arif Khan

Thanks Arif. I agree the Law says 5 years of continuous service, i.e., a minimum of 240 days each year. So based on that, one should get gratuity on completion of a minimum of 240 days each year, and in my case, it is a full 4 years and 300 days in the 5th year.

For getting gratuity benefit, 5 years of continuous service with the same employer are necessary. So, Mr. Vijay, you are not eligible for getting gratuity.

Dear Arif,

I tend to agree with Mr. Malik's comments.

What you are indicating is correct, as per the developments and interpretation of the Court.

But what you do not understand, may be due to your lack of experience, is that what Mr. Malik is pointing out is the REALITY and the practical aspect.

You should be aware that whenever a benefit is to be given, many private sector companies, with hardly any regard for ethics or corporate governance or natural justice, hardly ever pay the rightful dues of employees or ex-employees.

As a matter of fact, no private sector company (as rightly pointed out by Mr. Malik, though there can be a few exceptions) pays gratuity to an ex-employee unless:

- he has completed full five years of service
- they are forced to pay by virtue of a Labour Court order (in the rarest of rare cases)

What to talk of gratuity, are you aware that one has to struggle to get even earned leave encashment?

Your enthusiasm is commendable, but my friend, the reality is really deplorable.

Regards.

ELIGIBILITY FOR GRATUITY CLAIM :
· 5 years minimum service is required to get gratuity.
· In one case madras high court has given judgement that if someone has completed 240 days in fifth year he should be entitled for gratuity . As there is no amendment in act so eligibly stands 5 years,
MADRAS HIGH COURT :
· Reference of this case is
Mettur beardsell ltd, Madras vs Regional Labour Commissioner(central), Madras,1998 LLR1072
(Madras high court).

-regards
kangeyan

Mr. Vijay,

Gratuity is payable only after completion of five years of continuous service with a single employer. The amount is calculated based on the service with the employer, considering completion of five years of service and any part thereof (six months and above of service shall be calculated as a full year of service).

The settlement of gratuity depends on the funds management. If it is managed by the company, then it is in the hands of management to settle. If the funds are managed by LIC or any other entity, then it takes more than a month for settlement.

In your case, you are just short of two completed months to be eligible for Gratuity. Therefore, you are not eligible to claim the fund.

With warm regards,
T. Kumar

Hi,

In my view, the official is eligible for Gratuity due to the definition of Section 2A, which is as follows:

Section: 2A

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), layoff, strike, or a lockout, 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 that 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 that 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 percent of the number of days on which the establishment was in operation during such a period.

There is no such word as "feeling" in law. The company has to follow the rules and regulations according to the Gratuity Act of 1972.

Thanks to all for the comments. Many of you have mentioned the general practice of companies to provide gratuity upon completion of 5 years. Are there instances where an employee received gratuity for 4 years and 240 days?

You are not eligible. For eligibility, 5 years should be completed. There is no grace period for eligibility.

If you have any further questions, feel free to ask.

Chandratre,

If we look at the Madras High Court Judgment - 1998 LLR 1072, it has clarified the continuous service for the 5th year and that 4 years and 240 days are accepted for a Gratuity claim. I am aware that the employer is likely to refer only to the act that does not clarify the above, and the act has not been amended for rounding off the 5th year.

Thank you.

Dear Vijay,

Earlier, the A.P. High Court gave the judgment that five years of service are necessary to be eligible for gratuity. So, why should someone in Andhra Pradesh follow the Madras High Court judgment when they can avoid the A.P. High Court judgment? If we interpret the law, I agree that 240 days in the fifth year make one eligible for gratuity. However, until it is amended in the act, no employer will be willing to pay it.

Thank you,
J.S. Malik

As an employee, we do not have a salary slip or muster roll.

1. How can we claim that we have 5 years of continuous service?
2. If the company has less than 10 employees, is gratuity applicable?
3. The company is not keeping any statutory provisions.
4. In the third year, I took 3 months of unpaid leave (but had more than 240 days of service in that year).
5. Is it compulsory for the employer to pay gratuity?

Am I eligible for gratuity?

Jose C