Is an Employee with 4 Years and 10 Months of Service Eligible for Gratuity? Let's Discuss!

Kindly let me know if an employee serving 4 years and 10 months is eligible for gratuity and how the calculation is done for the Gratuity Amount. Recently, we have come across a case law from the Supreme Court:

The Payment of Gratuity Act, 1972

The Payment of Gratuity Act, 1972 ('the Act') provides for the payment of gratuity. Gratuity is a statutory social security benefit payable to an employee who separates from the services of the company and who has completed five (5) years of continuous service.

Further, the completion of continuous service of five years shall not apply where the termination of the employment of any employee is due to death or disablement. Such disablement should result in the termination of his employment.

Sec 2A of the Payment of Gratuity Act, 1972, provides for 'continuous service'. Section 2-A(2) of the Act states that for establishments that work for less than six days a week as their working days, the employee under such an establishment shall be deemed to be in continuous service.

Dear all,

Understanding 'Continuous Service' Under the Payment of Gratuity Act

The term 'continuous service' has been controversial ever since the Payment of Gratuity Act came into force in 1972. In one case, the Supreme Court has also interpreted the term, which led to the amendment of the definition by the Amended Act 25 of 1984, whereby a separate section 2-A defining continuous service was added. Again, by an Amending Act 22 of 1987, the amendment was made in the definition. To determine what continuous service means, it is imperative to reproduce section 2-A defining continuous service, which reads:

(1) "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 orders, rules or regulations governing the employees of the establishment), layoff, 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 the Act;

(2) Where an employee (not being an employee employed in a seasonal establishment) is not in continuous service within the meaning of clause (i) for any period of one year or six months, he shall be deemed to be in continuous service under the employer-

(a) for the said period of one year, if the employer 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 an establishment which works for less than six days in a week; and

(ii) two hundred and forty days, in any other case.

(b) 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 -

(i) 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

(ii) one hundred and twenty days, in any other case.

Explanation of Clause (2)

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-

(i) 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), or under the Industrial Disputes Act, 1947 (14 of 1947) or under any other law applicable to the establishment;

(ii) He has been on leave with full wages, earned in the previous year.

(iii) He has been absent due to temporary disablement caused by an accident arising out of and in the course of his employment; and

(iv) In the case of a female, she has been on maternity leave; so, however, that the total period of such maternity leave does not exceed twelve weeks).

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 period if he has actually worked for not less than seventy-five percent of the number of days on which the establishment was in operation during such period.

Regards,

KVJ Raghunath

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