Computation of 5 Years for Gratuity
How is 'Five-year service' to be computed under the Payment of Gratuity Act? Whether the period prior to the enforcement of the Act will be taken into consideration for computing five years of service?
The Payment of Gratuity Act applies to all those employees who are in service as of 16th September 1972, or subsequent thereto. The computation of five years' service from 16th September 1972 cannot be spelt out from any provision, and the Act applies on and from 16th September 1972 to the employees who have the credit of five years' service. The position is made amply clear by the definition of 'continuous service' contained in section 2(c) of the Act. (Cases of Bombay HC in Grindwell Norton Ltd., 1980 (40) FLR 53 and of Andhra Pradesh HC in Central Bank of India vs. T.K Ramamoorthy 1978 (52) FJR 490 were relied upon.)
Reference: Duncans Agro Industries Ltd. vs. B. Subbanna and others, 1981 (64) FJR 134 decided by A.P. (HC); 1985 Lab. IC (NOG) 94.
Meaning of Continuous Service
What is meant by 'continuous service' under the 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 has 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. In order 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: 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.
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