Gratuity Eligibility: Can Companies Deny It Even After 5 Years of Service?

Eligibility for Gratuity

Can every employee who has 5 years of experience be eligible for gratuity? Can a company have policies stating that they would not pay gratuity? Can a company pay gratuity if it does not allow PF in its clause?

Every employee with 5 years of experience may be eligible for gratuity. However, a company can have policies stating that they would not pay gratuity. Whether a company can pay gratuity without allowing PF in its clause would depend on the specific regulations and laws governing such payments.

I hope this helps clarify the potential scenarios regarding gratuity and company policies.

Yes, if it's continuous, and if the employee is on the company's payroll, he is eligible for gratuity.

Gratuity Eligibility After 5 Years

An employee will be entitled to receive gratuity after completing five continuous years of service.

Regards,
Ashish
Delhi
[Phone Number Removed For Privacy Reasons]

If the company doesn't clear the dues of any employee, the company will not pay gratuity in this case.

The question itself is confusing. The person who has completed continuous service of 5 years is eligible for gratuity, not just 5 years of experience. Experience can be with more than one employer. Furthermore, you cannot make a policy that does not pay gratuity. You have to obey the Act and Rules.

I mean to say "The person who has completed continuous service of 5 years in one establishment is eligible for Gratuity, and not 5 years of experience. Experience can be with more than one employer."

As per the court rulings, if a person works continuously for 4 years and 240 days, he is entitled to gratuity. A company's policy cannot be against the provisions of statutes, and hence, it is not possible for companies to have a policy against the provisions of payment of gratuity.

PF and Gratuity are totally different and governed by separate statutes, namely the Payment of Gratuity Act, 1972, and the Employees' Provident Fund and Miscellaneous Provisions Act, 1952. The only similarity is that both are social security legislations.

Regards,
Kalyan R

[Phone Number Removed For Privacy Reasons]

Every employee who has completed continuous service of 5 years in an organization becomes eligible for gratuity payment from that organization. As per the Shops and Establishments Act, every employee who has continuous service of 1 year and less than 5 years becomes eligible for service compensation. The calculation basis is the same in both cases. The law benefits the employee rather than the employer. The law supersedes any organization's policy. Policies must align with or exceed the respective Acts but cannot override them.

Regards,
JMK

The Payment of Gratuity Act, 1972

The Payment of Gratuity Act, 1972 applies to factories and other establishments employing ten or more persons. On completion of five years of service, employees are entitled to payment of gratuity at the rate of 15 days' wages for every completed year of service or part thereof in excess of six months, subject to a maximum of Rs. 10 lakh. The current maximum limit has been applicable since September 24, 1997. The wage ceiling for coverage under the Act was removed effective from May 24, 1994.

Regards

Eligibility for Gratuity Based on Employment Duration

If an employee has worked for 5 years in the same company, from the date of joining until the present date, they are eligible for gratuity. However, if the employee has worked in multiple companies during the same 5-year period, they are not eligible for gratuity from their current company.

Thank you.

Eligibility for Gratuity

Anyone who has completed 5 years of continuous service in a company is entitled to receive gratuity upon resignation or retirement.

Payment of Gratuity Act, 1972

• Principle
– By faithful service over a long period, the employee is entitled to claim a certain amount as a retirement benefit.
– Gratuity is paid out at the time of superannuation (if you retire at the age of 58), when you retire at any other age, or upon resignation, and in the event of your death or being rendered disabled because of an accident or illness. You need to have at least 5 full years of service with an employer to qualify for gratuity.

• Rate of Gratuity

• Gratuity =
• Every completed year of service * 15 days' wages
• 15 days' wages = (based on last salary drawn)
• {(Monthly Basic + DA) / 26} * 15 days
• Maximum gratuity
• Shall not exceed Rs. 3,50,000 as per the Act & it is not taxable

Regards

Amendment to Gratuity Act

There has been an amendment to the act which states that the gratuity limit has been enhanced from 3.5 lakhs to Rs. 10 lakhs, effective May 24, 2010, as per the Payment of Gratuity (Amendment) Act, 2010. I will go through this amendment to be more certain of the applicability and will post the updates ASAP.

Regards,
JMK

As per my knowledge, if an employee is on the company's payroll and continuously works for 4 years and 240 days in the same organization, then they are entitled to gratuity. The company can settle all dues from the employee's gratuity amount. However, the company cannot deduct any amount from the employee's PF amount (as per section 10(d) of the PF Act).

Thank you.

Calculating Monthly Gratuity for Fund Reservation

Is there any formula to calculate monthly gratuity for the fund reservation?

Regards, Rajesh

If an employee serves for 5 years continuously in the same organization, they are eligible for gratuity. It is not applicable if the employee has 5 years or more of experience in various organizations; they will not be eligible for gratuity. There must be a continuous minimum of 5 years of service in the same organization for the employee to be eligible for gratuity.

If any employee who is on the rolls of the company completes 5 years of continuous service, they will be eligible for Gratuity. The formula for calculating gratuity is as follows: Last drawn Basic * No. of years of service * 15/26. The maximum eligibility issue has also been recently revised.

Regards,
KSK

Payment of Gratuity Act, 1972

As per the Payment of Gratuity Act, 1972, the payment of gratuity is compulsory for the management of factories, plantations, mines, oil fields, railways, shops, and other establishments employing 10 or more persons. Gratuity is payable to all employees who render a minimum continuous service of five years with their present employer.

[QUOTE=Minkysharma;1685485]

Dear Minky, your queries are replied to as follows:

1. Eligibility for Gratuity

Five years of continuous service in the company without a gap is required for gratuity, i.e., 240 working days in a year.

2. Company Policy on Gratuity

Gratuity is a statutory payment and it can't be avoided based on company policy.

3. Gratuity and PF

Gratuity and PF are separate enactments.

Regards,

Gratuity Eligibility and Calculation

As per the provisions of the Gratuity Act of 1972, those who complete 5 years are entitled to gratuity. The gratuity amount will be calculated as follows: Last Drawn Basic & Dearness Allowance × 15/26 × Number of completed years of service.

If a person puts in more than 240 days of service in the fifth year, they are entitled to gratuity as per the guidelines laid down in the "Mettur Beardsell" case by the Madras High Court. Please refer to the 1998 LLR 1072 for the above case law.

Regards,
Kalyan R
[Phone Number Removed For Privacy Reasons]

Holding Gratuity for Loss Recovery

If the exiting employee has caused a serious loss to the company, then the company can hold gratuity as recovery. However, genuine documents to prove the case should be taken care of.