Understanding Gratuity Payment: Legal Requirements and Employee Rights Questions

Hi,

I have a query related to gratuity payment as mentioned below:

1. What is the minimum year of service required for payment of Gratuity?
2. According to LIC, if an employee completes a minimum of 4 years 8 months of service, he/she is eligible for Gratuity. Is this correct as per laws?
3. If we do not pay employees who completed 4 years 11 months and 29 days of service, can the employee take legal action against the company?
4. Can we get any lawyer (the best for labor laws) to provide us in writing all of the above?

Thank you in advance.

Best Regards,
Varsha Karalkar
Email: varsha_karalkar@yahoo.com

Hi Friend,

You have posed a marvelous question here. I have some suggestions that you can consider while solving the puzzle:

1. The minimum year of service is 5 years, which means the concern must have performed a minimum of 240 working days in a year.
2. Yes, as per the law, the LIC provision is absolutely correct. It is also required by the industry.
3. Yes, the concern may seek legal aid against this provision, which is illegal.
4. There is no need to specifically seek the help of an advocate for this issue.

If you need any further clarification, please let me know.

Thanks,
SSehgal

Hi Varsha,

Ssehgal is right.

As per Section 2A, continuous service means:

For the purposes of this Act:
- 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.

- 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 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 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 two hundred and forty days, in any other case; 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 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 one hundred and twenty days, in any other case.

- 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 such a period.

Regards,

Hemant Sailor

I have a query related to the entitlement of Gratuity payment. Whether MDs, Directors, and partners are entitled to Gratuity? Their appointment is as per the Company Act, and they are also receiving remuneration.
Regards,
Mahesh Patel

In order to be eligible for gratuity, one has to be with an employer for not less than 5 years. When calculating the amount of gratuity, only a fraction of a year exceeding six months will be taken as one year. For example, someone with 6 years and 7 months of service will receive gratuity for 7 years, whereas someone with 6 years and 5 months will only get gratuity for 6 years.

240 days are taken as the criterion for determining one's continuity of service. Therefore, an individual who has worked below the ground for 190 days and above the ground for 240 days will be considered to have continuous service for that year.

The Managing Director/Director/Partner will be eligible for gratuity if they are in receipt of a salary from the organization; otherwise, they are not eligible for gratuity because it is based on the last drawn salary.

Regards,
Madhu.T.K