Gratuity Eligibility Confusion: Can 4 Years and 6 Months Count as 5 Years?

Hi, there are two different theories that I came across pertaining to deciding the eligibility of gratuity payment:

Theory A: 4 Years and 240 Days of the 5th Year

Theory B: 4 Years and 6 Months (as every 6 months will be considered as part of the next year, meaning 4.6 becomes 5).

However, the Payment of Gratuity Act states the eligibility as 5 years of continuous service. I request if you can provide me with sufficient clarity and support with any case law or judgments passed so far.

Regards,
Satya

A fraction of a year over six months is considered as one year for the purpose of calculating the amount of gratuity but not for deciding whether the employee is eligible for gratuity or not. Therefore, if an employee leaves after completing 6 years and 7 months (or even 6 months and one day), then he will get gratuity for seven years, rounding off the 7 months as one year. However, for deciding eligibility, a fraction of a year over six months is not counted, and it is purely based on the completed years of service.

Eligibility for Gratuity

Though the Payment of Gratuity Act strictly states that five years from the date of joining are mandatory to make an employee eligible for gratuity, following the Madras High Court verdict in Beardsell's case, an employee who has completed four years and 240 days in the fifth year is eligible for gratuity. However, since this is an HC verdict, it may not be universally accepted by other states. Still, some states have followed it.

Regards,
Madhu.T.K

I do not think any further clarification is required after the explanation provided by Mr. Madhu T.K. However, if you wish, I would also like to support the views and opinions expressed by Mr. Madhu T.K.

Regards,
R.N.Khola

As Madhu has cleared this issue, I would like to mention that if an employee has completed 240 days in a year, it is considered a full year. According to the law, if an employee has completed 240 days, he will be considered in continuous service for the complete year.