Am I Eligible for Gratuity If I Resign After 5 Years with My Company?

I am working with a manufacturing company for the last 4.10 years. I joined as a Graduate Trainee and received an appointment letter from this company on 01.06.2008. From June 2008, the company started deducting my ESIC, PF, and Profession Tax.

Gratuity Eligibility Inquiry

My question is, if I resign from my position in June 2013, will I be eligible to receive gratuity from my employer? If not, then why? Kindly reply.

Thanks,
Vijay Datta Kamble

Usually, gratuity is paid after the completion of five years of continuous service from the date of joining. However, if an employee, like you, has worked for 4.10 years but has not completed 240 days in any year, he will not be entitled to gratuity. Therefore, considering your case that you have worked for over 240 days in the previous four years and also if you have worked for over 240 days in the last 10 months, you'll be eligible for gratuity under the Payment of Gratuity Act.

Definition of 240 Days

The definition of 240 days is your actual attendance on days you were present, excluding holidays and weekly offs. The Madras High Court and the Supreme Court have given judgments on the said issue in the past. I am sure the same information will be available in Cite HR's download section.

Warm regards,
Umesh Chaudhary
[Email Removed For Privacy Reasons]

Please find attached the Madras High Court judgment in support of your claim.

Regards,
R. Gunashekaran
Lawyer

You have mentioned that you have completed 4 years and 10 months with the company up to now. You joined the service on 01.06.2008 as a regular employee of the company and have expressed your intention to resign from service in the month of next June. You don't need to take the shelter of the Madras High Court judgment mentioned by our esteemed members. You have become eligible for the payment of gratuity under the Payment of Gratuity Act, 1972 by virtue of rendering a clear five years of service with the company.

Regards,
BS Kalsi
Member since Aug 2011

An employee is eligible to receive gratuity only after completing 5 years of continuous service (as per the Act). However, a judgment has been given by the Supreme Court stating that an "employee is eligible for gratuity if he has completed 4 years and 240 days of continuous service." Therefore, you are eligible to receive gratuity from your employer.

Regards,
Selvaganapathi V

If you resign only in June 2013, you are eligible for gratuity. If you resign earlier than June, you are not eligible. Strictly speaking, completion of 5 years of service is a must for gratuity eligibility under the gratuity rule.

Regards,
Venkat - Bangalore

As per the Act, 5 years of service completion is required. However, the Chennai High Court has ruled that individuals who have completed 4 years and 10 months are also eligible to claim the Gratuity Amount from the Company. The Company is obligated to pay the Gratuity.

Regards,
Vivek R

If you have joined as a Graduate Trainee on 1.6.2008, you are not considered an employee in your organization. As per the existing industrial practice, you will be considered an employee once you are given an appointment with a designation after your training period is over (one year in our organization). You will be eligible for any statutory benefits like PF, gratuity, etc., only from the date of your appointment as a regular employee. Please specify whether your appointment is in line with this or not. If it is, you will be eligible for gratuity only after you complete 5 years of continuous service from the date of your appointment as a regular employee and not from the date of your being taken as a Trainee.

Regards

The judgment regarding the eligibility of gratuity after the completion of 4 years and 240 days is from the Madras High Court, not the Supreme Court. Could you please share the Supreme Court judgment if I am mistaken?

Thanks & Regards,
Ganesh

PS: The earlier response should have been addressed to Mr. Selvaganpathi, not Mr. Kamble. Error regretted.

Ganesh

I agree with Mr. Balakrishnan regarding the 'training period.' Generally, ESI and PF are considered during the training period as well, as the person is placed against a permanent vacancy. However, avoid considering this training period when accounting for continuous service. This is the practice in many organizations.

In the Madras High Court judgment referred to by many members, there is no mention of considering the training period as a service period. It dealt only with the number of days required in a year for continuous service. I doubt whether this judgment can be considered in this case.

Regards,
Dr. Gopan

Here I am posting the judgment of the Supreme Court.

Clarity Between Gratuity Eligibility Service (5 or 4.8 years)?

The gratuity eligibility service as per the Gratuity Act 1972 is 5 years. However, as per the judgment from the Supreme Court below and the quotation from the book quoted below, it seems that the gratuity eligibility service is 4 years and 240 days.

Judgment from Supreme Court:

"Yes, by virtue of the judgment of the Supreme Court rendered under the provisions of the Industrial Dispute Act in Surendra Kumar Verma vs. Central Govt. Industrial Tribunal, [(1980) (4) S.C.C.433)], it is enough that an employee has a service of 240 days in the preceding 12 months, and it is not necessary that he should have completed one whole year's service. As the definition of continuous service in the Industrial Dispute Act and Payment of Gratuity Act are synonymous, the same principle can be adopted under the act also. Hence, an employee rendering service of 4 years, 10 months, and 11 days is considered to have completed 5 years of continuous service under sec. 4(2) and thereby is eligible for gratuity."