Gratuity Eligibility Under the Factories Act: Can Someone Clarify the Rules?

Hi,

Could someone explain the gratuity eligibility for employees under the Factories Act?

Regards,
A. Paulraj

Hi Paul,

An employee who has completed 4 years and 8 months in the fifth year is eligible for gratuity under the Act. It is not necessary to wait for the completion of 5 years.

Any guys' opinions on this?

Sushil

Friends,

Please ensure your fundamentals are clear. Gratuity is paid as per the Gratuity Act, and not as per the Factories Act. An employee is eligible if:

1. Worked for 5 or more years with uninterrupted service (no breaks), with each year completed comprising 240 days.
2. If the fifth year is not completed, then the employee should have worked for 240 days in the fifth year.
3. Authorized leave is considered for 240 days.
4. Apprentices are not eligible for gratuity.

For further details, please check the link below: http://vakilno1.com <link updated to site home>

Regards, Ketan

Dear Ketan and to all of my friends,

For the calculation of 240 days, not only authorized leave is considered, but there are about 15 to 20 points which are taken into account such as sickness leave, lay off, strike with prior information, accident leave, etc. Please refer to The Gratuity Act for details.

Thank you,
rrtpan

I had joined my company on 12th Jul '02 and worked until 31-Oct-06. I just wanted to know about my entitlement for Gratuity.

Regards,
Manish

Hi everybody,

Please clear my doubt. If an employee completed his service for 6 years and 5 months and then resigned, how do we calculate his gratuity when we settle his dues?

Do we calculate it as (i) Basic + D.A / 26 days X 6 years (90 days) or (ii) Basic + D.A / 26 days X 6.5 years (96 days)? Please mention clearly the Gratuity Act applicable in this case.

With warm regards,
A. Paulraj

We calculate as (Basic + D.A) * 15 days / 26 days X 6 years (90 days) i.e., 15 days salary for every year and six months in part thereof. i.e., 6 years and 6 months will be considered 7 years, but 6 years, 5 months, and 29 days will be considered 6 years only. Also, the amount of gratuity payable to an employee shall not exceed three lakhs and fifty thousand rupees.

Thanks & Regards,
Bhavik H. Chheda
www.chhedaconsultancyservices.com

Dear Paul Raj,

Gratuity calculation is equal to 15/26 multiplied by the last drawn salary (basic + DA) multiplied by the number of service years. Wages for calculation should be 15 days' wages for every complete year as if the month comprises of 26 days at the last drawn wages.

I have attached the gratuity checklist for your reference. Please go through it.

Regards,
N. Arumugam

Hi Sonal,

I hope this information helps you understand how the Gratuity Act works:

(1) Gratuity shall be payable to an employee upon the termination of their employment after they have rendered continuous service for not less than five years:
(a) on superannuation,
(b) on retirement or resignation, or
(c) on death or disablement due to accident or disease. It is important to note that the completion of continuous service of five years is not necessary if the termination is due to death or disablement. In the case of the employee's death, the gratuity will be paid to the nominee or, in the absence of a nomination, to the heirs. If any nominee or heir is a minor, their share will be deposited with the controlling authority for investment until the minor reaches majority. Disablement, for the purpose of this section, refers to incapacity that prevents an employee from performing their pre-disablement work.

(2) The employer must pay gratuity to the employee for every completed year of service or part thereof exceeding six months at the rate of fifteen days' wages, based on the last drawn wage rate of the employee. For piece-rated employees, daily wages will be calculated based on the average total wages received over the last three months before termination, excluding overtime pay. For seasonal employees, gratuity will be paid at the rate of seven days' wages for each season. Monthly rated employee's fifteen days' wages will be determined by dividing the monthly rate by twenty-six and multiplying by fifteen.

(3) The gratuity amount for an employee cannot exceed three lakhs and fifty thousand rupees.

(4) In case an employee works on reduced wages after disablement, the gratuity calculation considers the wages before and after the disablement period.

(5) This section does not impact an employee's right to receive better gratuity terms under any award, agreement, or contract with the employer.

(6) Gratuity may be forfeited partially or wholly if an employee's termination is due to misconduct causing damage to the employer's property, riotous conduct, violence, or an offense involving moral turpitude committed during employment.

Cheers,
Sonal

Hi Shankar,

I am Shankar, working in a proprietorship firm, and I have completed 5 years of service. However, they are not providing any salary slips. Can I demand gratuity?

Kindly share your thoughts.

Shankar

Dear,

If you have completed five years of continuous service as per Section 2A of The Payment of Gratuity Act, 1972, then you are eligible to receive a gratuity amount from the employer if the unit is covered under this act.

With Regards,
R.N. Khola

My uncle owns a company. We have three employees retiring in five months. The business is currently in a dire situation, and the gratuity insurance is also due now. How will he settle the amount, and what will be the consequences?

Regards