Gratuity Eligibility Question: Does 4.6 Years of Service Qualify for Benefits?

Hi all,

As per the Gratuity Act, if an employee completes a minimum of 5 years of continuous service, he/she is eligible for gratuity. Please correct me if I am wrong.

My question is, if an employee completes 4.6 months of continuous service, would he/she be eligible for gratuity or not? Please guide me urgently.

Regards,
Kanaka

Hi Kanaka,

Going by what I know and remember of the Gratuity Act:

1) Yes, 5 years of continued service makes a person eligible for getting gratuity.
2) 4.6 years means he/she has not completed 5 years. The rounding off after the decimal happens after 5 years are complete. That is to say, 5.3 years = 5 years (for calculation purposes), 5.7 years = 6 years (for calculation purposes).

This is as far as I know; I would like the senior members to confirm.

Cheers, Pallavi

Hi Pallavi,

Thank you for your reply. My consultant mentioned that an employee becomes eligible for gratuity after completing 4.8 months of continuous service. I appreciate the clarification.

Thanks a lot. Bye for now.

Kanaka

Hi,

Five years of completion are required to receive the gratuity amount from the employer. If it is 4.9 years, we will consider it as non-completion of five years. This is for your information.

Regards,
Sambasiva Rao

Dear Kanaka,

What you have mentioned regarding the payment of gratuity in case of completion of 5 years is true to the best of my knowledge. To the best of my knowledge, the Madras High Court has held that an employee rendering continuous service for a period of 240 days in the fifth year will be deemed to have continued in service for 1 year (completion of 5 years). That is, 4 years 10 months and 18 days. If completed, he/she is liable for Gratuity.

In one of the reference books, it is clearly mentioned that 4 years and 6 months is considered as 5 years, and hence the employee is entitled to gratuity. Therefore, kindly re-check.

Thank you.

Hi all,

As far as I know, gratuity is given only after the completion of 5 years, not less than that. But I had another query... Is the time of probation also included in the calculation of gratuity? For instance, if a person is on probation for 6 months, will the gratuity be calculated from his/her date of joining or from his/her date of confirmation?

Regards, Pallavi

Yes, the probation period will also be included for payment of gratuity. The Payment of Gratuity Act specifies continuous service of 5 years. It further clarifies the days to be included when a person is not in continuous service. Please be clear that gratuity will be calculated from the date a person has joined their service and not from the date of confirmation.

Cyril

Hi Kanaka,

Your question is quite intelligent.

What the Payment of Gratuity Act says is that "Those persons who have completed their five years of continuous service are entitled to the payment of gratuity."

In the real sense, gratuity is paid to employees for their faithful continuous service in the company.

Regarding your question, the time period of service is 4.6 years, which for calculation purposes is considered as 5 years. If the provision is like this, then he/she is eligible for the payment of gratuity.

According to the Act, a person can also be entitled to the payment of gratuity even if he/she has not completed the period of continuous five years, under the conditions of:

1) Discontinuation of work due to permanent disablement, or
2) Immature death.

In these two conditions, he/she is entitled to receive the payment of gratuity even if he/she has not completed five years of continuous service.

However, in my opinion, the person is not qualified for the payment of a bonus. The period of 4.6 years will not be considered as 5 years for the calculation of gratuity.

Santosh Dash
M.A. in Industrial Relations & Personnel Management
Berhampur University, Odisha.

Dear All,

I am new to this site. This site is really helpful for improving HR skills. Regarding Gratuity, I have a few queries on eligibility criteria:

a) Is it from the date of joining or from the confirmation date?
b) Suppose an employee dies one day after joining. Are they eligible for Gratuity?
c) For computing 5 years of service, do we count sick leaves as part of the service period?

Please kindly assist me.

Kind Regards,
G V Anil Kumar

Dear Friends,

The calculation for Gratuity is very easy:

BASIC + DA (Last Pay drawn) X 15 / 26 X No. OF YEARS WORKS.

For clarification, please see the attachment.

Regards,
PBS KUMAR

I am sorry to correct you, but based on my research and review of the act, it is stated that an employee becomes eligible for gratuity after completing 240 days in the fifth year of service. Thank you.

Ally

As per the provisions prevalent in the Payment of Gratuity Act, 1972, an employee becomes eligible for gratuity after completion of 5 years of service. You are very correct in this aspect. As you asked whether a person who has completed 4 years and six months will be eligible for gratuity or not. Since the employee has not completed five years, they are not eligible for gratuity at all according to the provisions in the Act.

GK Sharma
MA, LL.B, PGDPM & LW

Dear Mr. Sharma,

Kindly guide me on delayed payment of gratuity by 1 year. Is there any penalty? Interest (as per the act, yes)? If yes, what is the rate of interest or penalty.

Regards,
Joseph

Under the Payment of Gratuity Act, 1972, an employee becomes eligible for gratuity at the rate of 15 days per year after the completion of five years. So, you are very right that the minimum length of service for payment of gratuity is 5 years.

The period of 4.6 years cannot be treated as five years. Hence, not eligible for the gratuity.

(G K Sharma)

I am in a similar situation. I have resigned, and on my handing over day, I am completing 4 years, 6 months, and 10 days. Now, I am anxious to know if I am eligible for gratuity, or is it mandatory to complete 5 years? Rounding off is only for the calculation of the amount.

Hi,

Please note completion of 240 days of continued service is a MUST to avail gratuity. Also, an employee becomes eligible under conditions specified in the act (Ref Mr. Santosh's post above). Be it the training period, probation period, maternity leave, paid holidays, or compensatory holidays - all are taken into consideration for this purpose. Please correct me if I am wrong.

- Saravana Rajan S.

Hi Praveen,

If an employee leaves anytime between 4.6 years to 5 years, it will also be considered as 5 years of service for the purpose of calculating gratuity.

Hi,
As per the Act/Gratuity Calculation, if a person completes 4.5 years of service, he/she is eligible for Gratuity. Please refer.
Regards,
Ramlingam.V

Dear Employee,

Employees who complete 4.5 years of continuous service are eligible for Gratuity.

Regards,
Ramalingam.V

As per the basic Act, one who has even one day short to complete 5 years is not eligible for gratuity. The matter of 240 days is taken only to decide continuous service. As such, one who had 240 days of work (inclusive of leave due to employment injury, CL, ML, lay off, etc.) in a year shall be treated as having continuous service. This is to protect such employees who may not be regularized by the employer to deter so many rights in the law. There is also some misconception that only confirmed employees are eligible for gratuity, EPF, etc. That's why a provision has been made to interpret 'continuous service' by reading 240 days of service. But this is not applicable to death cases, where, as one member asked, one who dies the very next day of his service will get gratuity; but the amount of gratuity will be to that extent only.

However, there are court verdicts (Madras HC and Delhi HC) allowing gratuity to employees who have not completed 5 years of service but on the basis of their 240 days of service in the fifth year.

Regards,

Madhu.T.K

Dear Mr. Madhu,

It's clear and informative information. However, I have noticed that in this forum, the latest post appears on the last page. Please check if it follows an ascending date order. It would be better if the latest post appears at the top (in descending date order).

I kindly request you to check if something can be done about this.

Best regards,
Saravana Rajan

I had also experienced the same case where the company didn't pay the gratuity to the employee who left the organization after 4 years and 10 months of regular service. I am personally not convinced with this, as it was only 2 months away from completing the 5 years.

Can somebody advise if he can go back and ask for his gratuity from the previous employer? This is a recent incident.

Dear all,

Could someone please clarify the Gratuity ceiling of Rs 350,000? One of our employees has completed 8 years in the organization, and his gratuity figure exceeds 350,000. According to the law, the company has the option to pay either 350,000 or the total amount. Senior members, kindly confirm if my understanding is correct.

Warm Regards,
Smita

Gratuity Maximum limit that the employer will pay is Rs. 350,000 as per the act. If the employee gratuity payable exceeds this limit, we may restrict up to Rs. 350,000 - we need not pay the total amount.

Raghu

Hi,

You can take a look at the following URL. Hope it'll be of some help:

[Calculate Gratuity](http://profit.ndtv.com/Calculators/gratuity.htm)

Warm Regards,
Moumita

Gratuity Calculation

Basic + DA (Last drawn) x 15 / 26 x Number of years of service.

- Saravana Rajan

The maximum period of service to be eligible for gratuity is 5 years. Companies have the liberty to pay gratuity for a lesser number of years of service, such as 2 or 3 years. However, this must be explicitly stated.

Hi,

I am working in an IT firm, and after completing my 6 years of service, I have been transferred to the US head office on an L1 visa. Here, I have joined as a new employee with no connection or benefits related to the India office.

I want to know if I am eligible for the Gratuity fund or not.

Regards,
RS

If your transfer to the US Office is not in continuation of your service in India, your services in India are supposed to have been terminated. As such, you are eligible for Gratuity. On the other hand, if your posting is only a temporary arrangement with a condition that you will be posted back in India, it will be presumed that you are still in service. Therefore, study the transfer order in detail and act accordingly.

Regards,
Madhu.T.K

Dear all,

As far as my knowledge goes, a person is eligible for gratuity only if he/she has completed 5 years of continuous service. However, recently I heard about a court order stating that if a person completes 4.6 years of service, they are eligible for gratuity. Kindly correct me if I am mistaken. If not, could anyone send/publish the court order, please?

Thanks and regards,
Meena Kumar V

An employee with a basic salary of Rs. 11,000 per month (without DA) has completed 2.5 years of service (exactly 30 months). Before that, he was absent for 2 months due to an accidental injury. Kindly help me in calculating his gratuity.

(Basic) X (15/26) X No. of years worked (2 or 3)

Kindly help.

The employee was on leave for two months immediately preceding the date of death. If that leave was a sanctioned leave with pay, he is deemed to have completed 2.5 years. It is stated that any fraction of leave beyond six months (which shall mean at least one day over and above six months) shall be treated as one year. However, being a death case, it is advised to calculate gratuity treating the six months as one year, and as such, the amount of gratuity shall be Rs 19,038 calculated on the basis of 15 days' pay for three years.

On the other hand, if two months' leave was absence without pay, naturally, the legal representatives of the deceased will receive only two years' gratuity since the employee had only 2 years and 4 months of service with the establishment.

Regards,
Madhu.T.K

Thank you, Madhu, for your help. He was on approved leave, but as his leave balance was not there, no salary was being paid. I skipped to mention that he joined the duty one month before expiring. So, his service is 2 years 3 months + 2 months leave without pay (due to an accident) + 1 month of duty. Kindly provide your guidance under these new facts.

Normally, loss of pay will be treated as service interruption. If you look at the definition of eligible service for gratuity, it should be uninterrupted service which includes days on which he was laid off, days for which he was under medical leave following an employment injury, days on which he was on approved leave (with pay), maternity leave in case of women employees, etc. Therefore, two months of leave without pay will not count towards his service and qualify for gratuity. Under this circumstance, his heirs are to be paid gratuity for two years only. As already stated in my previous post, it depends on the company, and there is no law which prohibits from paying anything more than what is stated in the statute. Therefore, if the company desires to pay three years of gratuity on humanitarian grounds, follow that. But remember that a privilege once given cannot be easily withdrawn as privileges become rights!

Regards,
Madhu.T.K

In my organization, one person has completed 27 years, 5 months, and 24 days of service. How do I calculate the gratuity?

My question is if an employee completes 12 years and 5 months of continuous service, whether he is eligible for gratuity in 12.5 years or 12 years. Please guide me urgently.

He will be entitled to receive gratuity for 12 years only. In the case of Bharat, the gratuity will be restricted to 27 years.

Regards,
Madhu.T.K

Can gratuity be withdrawn by a person after completing 5 years of service but before retirement or resignation, if an employee requests?

Date of joining is - 06/09/2005, last working day - 08/04/2011. Basic salary is $25,000. How much is gratuity? What will we consider, 7 years of service or 6 years of service?

Hello Concerned,

Date of Joining: 20-05-2013
Date of Leaving: 05-01-2018

Kindly confirm if I am eligible for the gratuity and what will be the gratuity amount I will be receiving.

Regards,
A Sharma