Am I Eligible for Gratuity If I Leave Before Completing 5 Years? Seeking Guidance

Dear Sir,

Can you please let me know the rules of Gratuity and the sections pertaining to gratuity. In my case, I joined the organization in Feb 2006. In another 3 months, I'll be completing my 5 years of service. Since I've received an offer and I need to leave the organization, kindly guide me on whether Gratuity is applicable.

Awaiting your reply.

Regards,
Sapna

If you complete 5 years of service, you will be entitled to a Gratuity payment. Hence, before taking any steps, think once again. Anyhow, if you have decided to leave the company, my advice is to wait until you are eligible for gratuity. This is only advice; the decision is yours.

I wish you all the best.

Dear Sapna,

In addition to my friend Telikepalli's reply, I shall give the details on the calculation of Gratuity.

For gratuity calculation, the formula is: Number of years of service x last drawn salary x 15 / 26.

1. Number of years of service: If the service comprises completed years and a fraction of a year, the fraction has to be rounded to a full year. i.e. If the fraction is 6 months or below, it will be rounded down. And if it is above six months, it will be rounded up.

2. Last drawn salary: Practically, it is advisable to take the average salary of the preceding twelve months.

For example: Let the service be 5 years and the salary be Rs. 26,000.

Gratuity calculation is = 5 x 26,000 x 15 / 26 = Rs. 75,000.

Note: Now the ceiling limit for gratuity is Rs. 10,00,000. But if the employer wishes, he can give above Rs. 10,00,000. However, as per section 10(10) of the Income Tax Act, tax exemption is limited to Rs. 10,00,000. After 5 years, if you continue for 6 months and one day in service, you will be eligible to get 6 years' gratuity.

Abbas P.S

Sapna,

As per the Gratuity Act, one has to complete 5 years of service to be eligible for gratuity. You said that you have completed 4 years and 9 months. At this juncture, if you leave your organization, you are not entitled to receive gratuity. It is up to you to postpone your decision of changing your job.

V. Balaji

You are eligible for gratuity. As per the Gratuity Act, you have completed 4 years and 240 days (9 months) to become eligible for gratuity.

Dear Sapana,

I would like to inform you that if you have completed 4 years and 9 months in the job, you will be entitled to the gratuity because as per the act, there should be a continuation of service for 5 years. For the computation of the continuation of service, if in the fifth year you have worked for 240 days, you are entitled; there is no need to complete five years. Once you complete the 240 days in the fifth year of service, you will be entitled to the gratuity provided you have worked continuously since joining the organization without any breaks. Many people have confusion about completing five years, but they need to read the section with the definition of continuation service.

I hope this clears your doubts, and if you have a good opportunity, you can move ahead in life without worrying about gratuity. If you have any queries, feel free to revert back to me.

Raj Ambalia
Sr. Officer (HR & ADM)
Mother Dairy, Gandhinagar
Email: raj_ambalia@hotmail.com

Dear HR Colleagues,

In the fifth year, an employee has to complete 240 working days for eligibility for gratuity, not merely 240 days.

Regards,

Hi Sapna,

This is in reference to your queries regarding entitlement of Gratuity benefits towards your tenure of services. As you have completed 4 years and nine months as of now, I would like to clarify that your service should be continuous until the current date. For the fifth year to be considered, it requires completion of 240 working days during the year to qualify as continuous service for the fifth year, which is taken into consideration for entitlement for gratuity. If you fulfill the above criteria, you are entitled to the gratuity.

Please feel free to ask if you have any further queries.

Thanks,

Prabhash Kumar
Head - HR
IDFS Pvt. Ltd., Gurgaon

Definition of Wages Under the Payment of Gratuity Act, 1972

We are to follow the definition of wages as provided by Section 2(s) of the Payment of Gratuity Act, 1972, which may be read as under:

Sec. 2(s) "wages" means all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employment and which are paid or are payable to him in cash. It includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages, and any other allowance.

Regards,
R.N.KHOLA
www.skylarkassociates.com/

Dear Sunil, If your establishment is covered under the P G Act, 1972, then your query relates to Sec. 7 of this Act. The relevant portion is reproduced hereunder for your ready reference.

Determination of the Amount of Gratuity

1. A person who is eligible for payment of gratuity under this Act or any person authorized, in writing, to act on his behalf shall send a written application to the employer, within such time and in such form as may be prescribed, for payment of such gratuity.

2. As soon as gratuity becomes payable, the employer shall, whether an application referred to in sub-section (1) has been made or not, determine the amount of gratuity and give notice in writing to the person to whom the gratuity is payable and also to the controlling authority specifying the amount of gratuity so determined.

3. The employer shall arrange to pay the amount of gratuity within thirty days from the date it becomes payable to the person to whom the gratuity is payable.

With Regards,

R.N. KHOLA | LL & IR | Skylark Associates | Gurgaon | Haryana |

Welcome Skylark Associates

Dear All, Can you help guide me in obtaining the gratuity amount from my previous organization? I worked there for 5 years, but they refused to give me my gratuity. I joined on 01.05.2006 and resigned on 14.05.2011. The organization claims that according to section 2(a) of the Act, employees should have continuous service of 5 years. Since I joined on 01.05.2006, they say I am not qualified to receive the gratuity benefit for the year 2006. Subsequently, I resigned on 14.05.2011 and had not completed the required number of days in that particular year. Therefore, they argue my total years of service is only 4 years. Is this correct? Kindly help me.

Thanks, Shanthi

Thank you for such valuable and relevant answers. I wish to know whether any employee completing 5 years with an organization is eligible for Gratuity or if there is a compulsion that PF is deducted from the person's salary. Does gratuity have anything to do with PF deduction? I look forward to your response.

Thanks and Regards,
Harvinder

I also have the same query regarding Gratuity as Sapna. My employer has refused to pay me Gratuity. However, I have completed 4 years and 9 months of continuous service. Please guide me on how I can claim my gratuity.

Regards,
Charu

Our friends have elaborately discussed the Gratuity Act. However, please note that in Tamil Nadu, 4 years and 240 days (5th year) will be applicable for gratuity (please refer to the Mettur Judgement given by the Madras High Court). In other states, you need to complete 5 years of continuous service.

Regards,
S. Rajasekaran
[Email Removed For Privacy Reasons]

In furtherance of the discussion, if an employee completes 5 years of service, they are eligible for gratuity. However, gratuity will only be paid for those years in which the employee attends 240 days. For example, if during five years of service, the employee does not attend 240 days in one year, gratuity will be paid for 4 years only.

I hope you understand my point.

Thanks and Regards,
AVGN Vara Prasad

Regarding gratuity, I want to know if a company shuts down its operations within 5 years of operation, is the employee eligible for gratuity in full and final payment?

Dear Members and Experts, I want to know what the rules and regulations are for Gratuity payment in an Educational trust.

Regards, Gautam.

I am working in XXXX company. On 14.03.2008, I joined the company. Now, I want to leave the company, but my company says a minimum of 5 years is required for gratuity. Please help me to leave with gratuity.

Regards,
BABU