Can You Claim Gratuity After 4 Years and 10 Months of Service? Let's Discuss

Dear Experts,

Can you please explain the following points?

1) Is anybody eligible to receive gratuity if they resign after completing continuous service of less than 5 years (specifically, 4 years, 10 months, and 11 days)?

2) If it is mentioned in his appointment letter that he will be exempt from the 'Industrial Dispute Act,' what will happen regarding his claim for the above gratuity?

Thanks and regards,
P.C. Bagchi

Hi Prakritish,

I have seen your post in Cite HR. If you had posted it in an HR forum, you would have received a lot of replies from fellow colleagues. Okay, for your queries, find the answers below:

If a person has not completed 5 years of service, he is not eligible for the gratuity amount. Only in the case of the death of an employee, this clause is not applicable.

People get confused with the rounding of the service to 5 years for those who have completed 4 years and a few months. This rounding off of years is applicable after 5 years of completion. For example, if a person completed 5 years 8 months, then his total service becomes 6 years and not 5 years. So, to claim gratuity, it is necessary that the employee should have completed 5 years of service.

For your second query, although it is mentioned in the appointment letter that the employee is out of the purview of the Industrial Disputes Act, the employer cannot deny the gratuity. It will not fall under the ID Act. The gratuity is a separate entity. Whatever the case, it has to be paid, except if the employee is terminated on account of misbehaving or any other acts that caused a loss to the employer.

Hope this clarifies your query.

Regards,

Umesh S.

Thank u Mr. Umesh for ur reply. But I want to draw ur attention to one case law of Supreme Court which is as below:
Can a service of 4 years 10months and 11days constitute 5 years continuous service ?
"Yes, by virtue of the judgment of Supreme Court rendered under the provisions of the Industrial Dispute Act in Surendra Kumar Verma vs. Central Govt. Industrial Tribunal,[(1980) (4) S.C.C.433)], it is enough that an employee has a service of 240 days in the preceding 12 months and it is not necessary that he should have completed one whole year's service. As the definition of continuous service in Industrial Dispute Act and Payment of Gratuity Act are synonymous, the same principal can be adopted under the act also and hence an employee rendering service of 4 year 10months 11days is considered to have completed 5 years continuous service under sec.24(2) and thereby is eligible for gratuity."
What is expert's view on it ?
Prakritish

Hi Prakritish,

It is really good information with reference to the Supreme Court judgment. Based on your Supreme Court case number, I will study the case in detail and put my views in this regard. In general, the judgment you have mentioned here says that even before the completion of five years of service, i.e., 4 years 10 months, etc., by an employee, they are also eligible for getting the gratuity. Two years back, I also faced the same situation. I had completed my service in a company for 4 years and 10 months, and as you said, I was also informed by somebody that I could claim the gratuity. However, when I checked with a consultant, I was told that rounding off would be done only after the completion of 5 years.

Even when we had a one-on-one discussion with the Deputy Labour Commissioner a few years back, we were told that if a person resigned a day before the completion of 5 years, they are not eligible for gratuity.

Now, we need to find out exactly what the law says. If it is as you have told, then I am also eligible to get the gratuity from my previous company.

Let us wait for experts' comments on this. Meanwhile, I will check the case law you have mentioned.

Regards,

Umesh S.

Hi Prakritish,

I was searching for the case law which you mentioned on the website of Judgments Online of the Supreme Court. The citation you provided shows no results. Could you please inform me where you found this judgment? Please let me know the portal where you accessed it.

Regards, Umesh S.

Hi Umesh,

Please note that I obtained this information from a Law Book (Bare Act, 2004) - The Payment of Gratuity Act, 1972 (Publisher: Law Publishers (India) Pvt. Ltd. 18A-S.P. Marg, Post Box-1077, Allahabad-211 001. Phone: 623735, 623741 Fax: 0532-622276, email: sai@lawpublishersindia.com; website: lawpublishersindia.com).

Prakritish

I think someone who has completed 4 years and 6 months (190 days = 1 year) where the company follows a 5-day week, and 4 years and 8 months (240 days = 1 year) where the company follows a 5-day week is eligible for gratuity. The Payment of Gratuity (Second Amendment) Act, 1984 clarifies this. One needs to calculate the number of years and service completion as follows:

A company which follows a 5-day week: DOJ 1.05.2000 -
01.05.2000 to 30.04.2001 - worked for 190 days
01.05.2001 to 30.04.2002 - worked for 190 days

If we go by the above formula and if the person does not have any break in service, he will be eligible for gratuity on 01.11.2004.

Regards,
P. Balakrishnan

Dear Experts,

I would like to clear one query. In the case when an employee has worked for 4 years and 216 days, would he be eligible for gratuity? I am looking for a reference to a Supreme Court decision regarding this. Kindly help.

Pooja

Dear Pooja,

As far as my knowledge goes, gratuity will be paid based on the date of joining and the completion of years of service. It is not based on 4 years and 216 days. If the person completes 5 years of service within that 216 days, then they need to be paid. In other words, based on the date of joining of an employee, the day when they complete 5 years of service, they will be eligible to receive the gratuity. However, the calculation will be rounded off to the next higher or lower fraction after the completion of 5 years. Therefore, no one will be eligible to receive gratuity if they have not completed 5 years of service.

Gratuity will be paid if an employee dies before completing 5 years of service, and it will be paid to the dependent family member or nominee.

Regards,

Umesh S.

Hi all,

Due to the ramp-down of the workforce, our organization has planned to shut down our division and has asked us to look out for other opportunities.

I have completed 4 years, 11 months, and 29 days (My last working day would be 29 June 2009, and my joining date is 1st July 2004).

What is the definition of "continuous service"? Am I eligible for gratuity?

Definition of Continuous Service:
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:
(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.

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 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).

Thank you.

Dear Mr. Bagchi,

You can very well claim the gratuity. Attached herewith is the decision of the Madras High Court, which is pretty clear on the issue. The rest are all assumptions based on personal opinions.

Re: Gratuity Act

1) He is eligible for gratuity as he completed 240 days in the 5th year.
2) Management cannot decide whether he is an employee under the Industrial Dispute Act. You cannot state in an appointment letter that the Industrial Disputes Act is not applicable to him. Any appointment letter that goes against the law is null and void.

I have retired from a central public sector enterprise in July 2007. I have received 3.5 lacs as gratuity. Now, based on DPE guidelines, some enterprises implemented gratuity enhancement and paid the balance amount, keeping 10 lacs as a ceiling. Let me know whether I have to wait for the amendment of the act or lodge a claim for the balance amount.

There is a latest judgment of the Madras High Court stating that a person having completed 4 years and 240 days is eligible for gratuity payment.

Dear Expert,

I want to know whether I am eligible to receive gratuity or not. I joined a public LTD company on 10th Jan 2014 and continued my service until my last working day on 24th Nov 2018. Please let me know if I am eligible to receive gratuity under various sections or cases, or if there have been any amendments made in the law. Your advice will be valuable to me, and I can then claim gratuity from the company.

Thank you.