Gratuity Eligibility: Can You Claim It After 4 Years and 240 Days in a 5-Day Work Week?

Have you worked in a company for 4 years and 240 days? Does the company follow a 5-day work week? Please advise whether gratuity is payable or not.

As per the Gratuity Act, an employee has to complete 5 years of continuous service in a company to claim gratuity. However, some state high courts have issued circulars regarding the Gratuity Act, stating that employees can claim gratuity after completing 4 years and 240 days of continuous service in a company.

Please find attached the judgment by the Madras High Court about the Gratuity Act.

Thank you.

As per the Payment of Gratuity Act, 1972, if an employee completes 240 days in the 5th year, then the employee is eligible for gratuity payment for 5 years, provided there is continuous service in the last 4 years.

Gratuity Payment on Termination of Employment

Gratuity shall be payable to an employee upon the termination of their employment after they have rendered continuous service for not less than five years. This applies in the following cases:
- On their superannuation
- On their retirement or resignation
- On their death or disablement due to an accident or disease

Provided that the completion of continuous service of five years shall not be necessary where the termination of employment is due to death or disablement.

If an establishment works fewer than six days in a week, then the number of days required for continuous service is 190 and not 240. Please read Section 2-A(2)(a)(i) of the Payment of Gratuity Act 1972, which reads as follows:

(i) One hundred and ninety days, in the case of any employee employed below the ground in a mine or in an establishment that works for less than six days in a week; and

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

Interpreting Beneficial Legislation

Jurisprudence is about interpreting the provisions of law in such a way that they seem just and fair. I strongly believe that when interpreting any beneficial legislation, we should give the provision the most liberal interpretation possible so that it favors employees and does not result in injustice to employers.

Entitlement of Gratuity

I wholeheartedly agree with Learned Justice S.M. Abdul Wahab, as he has provided a well-reasoned judgment regarding the entitlement of gratuity. In my opinion, the entitlement of gratuity is for 4 years and 240 days.

I kindly request all members to review the attached judgment and analyze the reasoning presented by the Learned Justice without delving into the technicalities of territorial jurisdiction.

Thank you.

To be eligible for Gratuity, the following conditions must be fulfilled:

Conditions for Gratuity Eligibility

1. The Act must be applicable to the establishment situated in any State other than J & K. It should be a factory, mine, oilfield, plantation, port, railway company, or establishment in which ten or more persons are/were employed in any of the preceding twelve months.

2. The person should come under the definition of "employee" under Section 2(e).

3. He must have completed 5 years of continuous service, except in the case of death or disability due to accident or disease.

4. Gratuity is payable only at the time of termination of employment through superannuation, retirement, or resignation and NOT PAID after completion of five years.

Regards

Yes, you have to pay the gratuity to the employee if he has completed 4 years and 240 days.

Madras Court Decision on Gratuity

The Madras Court case in this regard gave a decision that after 4 years and 240 days, gratuity will be applicable.

I believe that if an employee completes his/her service continuously in one industry for a minimum period of 4 years and 280 days, then they will be eligible for gratuity. However, in the case of a private company, if the company uses outsourcing, it is the responsibility of the company contractor to pay gratuity upon the company's willingness.

Thanks and Regards,
Nilesh

Dear Team, it will be applicable only for Tamil Nadu, not for other states.

Applicability of the Madras High Court Judgment

Dear Karunakaran, the applicability is different. Yes, the Madras High Court judgment has a binding effect on Tamil Nadu, but it also holds persuasive value for other states. If the judge finds the facts of the case to be similar and the reasoning given by the Madras High Court to be acceptable, he may decide the case on the basis of that.

Regards

Unfortunately, even though I have completed 4 years and 240 days, the company is not paying gratuity. Can anybody guide me on what to do now?

Please submit an application to the Labour Commissioner. They are the authority under the Payment of Gratuity Act. The Commissioner will issue summons to your company and assist you in obtaining your gratuity.

Regards,

I agree with Mr. Kutty. For counting 5 years, please check these two conditions:

1. The difference between the last working date and the date of joining should be 5 calendar years or more, AND
2. In all these 5 years, one should have completed 240 or 190 days as the case may be; otherwise, it would be treated as a break in service, excluding certain conditions like a lockout, legal strike, absence due to a work-related accident, etc.

If both the above conditions are met, then one would be eligible for gratuity.

Regards,
Dixon
Tata Trent
Pune