Understanding Gratuity Act Eligibility Criteria for Employees

Dear Sir,

I am working in a small service-based organization, and in our organization, one of the employees has worked for 4 years and 9 months. Is he eligible to receive a Gratuity amount?

Warm Regards,
Laxman Manoji
9663363979

Dear Mr. Laxam Manoji,

As per the Gratuity Act, gratuity is calculated only when worked for 5 years or more with continuous/uninterrupted service, with each year completed 240 days of service. Therefore, if one has worked for 4 years and 240 days (in the preceding year, i.e., the fifth year), they are said to be eligible for gratuity.

Refer to Gratuity Act, u/s 2A: Continuous service.

(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 order, 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 this Act.

(a) for the said period of one year, if the employee 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) ninety-five days, in the case of an employee employed below the ground in a mine or in an establishment that works for less than six days in a week; and

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

For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days' wages based on the rate of wages last drawn by the employee concerned.

Hi,

As rightly said by Sharmila, you are definitely entitled to Gratuity. I resigned from MetLife last year in June '12 after completing 4 years and 7 months. Upon reviewing the Gratuity policy, I discovered that completing 4.6 years is considered equivalent to completing 5 years. I also obtained email confirmation from the Head of HR regarding this matter. In my Full and Final settlement, I received gratuity based on my current basic salary norms.

Regards,
Chetan Kumar

Dear Ms. Sharmila,

We have come across the same case in our organization. An employee was working with us for 4 years, 9 months, and 4 days. When we discussed this with our legal advisor, he suggested that it is up to the management's discretion to pay the gratuity or not. Which is correct?

Vinoth

Dear Mr. Vinoth,

As per my earlier post, I would like to once again confirm that 240 days worked in each calendar year, up to 5 years, are said to be eligible for gratuity payment. The gratuity is paid at the rate of 15 days' salary for each completed year. There are certain companies where the management decides to provide gratuity as a welfare payment to employees, but these provisions should not affect the Payment of Gratuity Act 1972.