Gratuity Eligibility: Does Missing One Year Affect This Employee's Gratuity Rights?

Dear All Respected Seniors,

Below is a case where the employee worked as per the given details:

1st Year = Completed 240 Days
2nd Year = Completed 240 Days
3rd Year = Completed 240 Days
4th Year = Completed 240 Days
5th Year = Not Completed 240 Days
6th Year = Completed 240 Days
7th Year = Completed 240 Days
8th Year = Completed 240 Days
9th Year = Completed 240 Days (Resigned & Separated after completion in the 9th Year)

So, is the employee eligible for Gratuity as per the Gratuity Act?

Thanks in advance...!!!

The concerned employee is eligible for Gratuity, as he has completed more than 5 years of service with the company as per the norms of the Gratuity Act.

Thank you.

Yes, he is eligible for gratuity. But for how many years? In the above case, in the 5th year, he has not worked for 240 days. The number of days short of 240 are those for which the employer has issued an order treating it as a break in service (read sec 2A(1) of POG Act). He will get gratuity for 8 years only. The 240 days include days of layoff, leaves earned in the previous year, absence due to employment injury, and 12 weeks of ML in addition to actual presence.

Regards,
Varghese Mthew
[Phone Number Removed For Privacy Reasons]

I see that you have been a member since 2007. Are you working in the HR department or in some other function? It is surprising that such queries are put up for resolution at all.

Anyone with even the slightest understanding of the Payment of Gratuity Act, 1972, should know that under Section 4 of the Act:

Payment of Gratuity

"Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years."

The provision is VERY CLEAR. The concept of 240 days only applies in the 5th year. For longer services, i.e., 6, 7, 8, or more years, there is no need to consider 240 days for the PURPOSE OF ELIGIBILITY FOR GRATUITY.

The concerned employee here has worked for 9 years. Just because he has worked for less than 240 days in the 5th year, do you want to deprive him of his gratuity?

We would like to know, what was the purpose of making this query? Is it to find out ways to AVOID payment of rightful gratuity to an employee who has worked for 9 years?

Thank you.

Prashant, the query cannot be answered with the information you have provided. The eligibility for gratuity will depend on the reason for which he did not complete 240 days in the 5th year. The act discusses continuous service.

What is Continuous Service?

You need to check your standing orders to determine what constitutes a service break. If there was a service break, then the continuous service starts again from the date he rejoined, and he will not have completed 5 years.

Leave of absence properly approved, even without pay, does not amount to a service break. Courts have established similar rules for other conditions (maternity-related leave is not considered service breaks). If you can inform us why he did not complete 240 days in that month.

Dear Seniors,

Thank you very much for your kind inputs. My query was related to the unauthorized absence of an employee, for which the employee has been "warned" after issuing a charge sheet. The employee has asked for a "Written Apology" for his misconduct and requested not to be terminated.

Dear friends,

Please go through the following provisions of the Act which are self-explanatory.

Gratuity Eligibility and Continuous Service

Whether an employee is absent due to reasons ranging from sickness or absence as a result of any accident—whether or not in the course of employment—or for whatever reason, including unauthorized absence, it cannot be an excuse to deny them gratuity.

(2) Where an employee (not being 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, they shall be deemed to be in continuous service under the employer:

(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) One hundred and ninety 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) 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 that works for less than six days in a week; and

(ii) One hundred and twenty days, in any other case;

Explanation of Continuous Service

For the purposes of clause (2), the number of days on which an employee has actually worked under an employer shall include the days on which:

(i) They have 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) They have been on leave with full wages, earned in the previous year;

(iii) They have been absent due to temporary disablement caused by an accident arising out of and in the course of their employment; and

(iv) In the case of a female, she has been on maternity leave, provided that the total period of such maternity leave does not exceed twelve weeks.

(3) 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, they shall be deemed to be in continuous service under the employer for such a period if they have actually worked for not less than seventy-five percent of the number of days on which the establishment was in operation during such period.

For whatever reasons, if the employee has not been present for more than 240 days in a year, it does not constitute a break in service.

In big manufacturing industries, many employees routinely suffer accidents and are unfit for more than six months at a time. Their presence for less than 240 days does not make them ineligible for gratuity in similar cases.

Women employees take maternity leave and additional childcare leaves, and thus, in their service tenure, there will be several instances where after three or four years they will attend duty for less than 240 days in a year.

Does it mean that their gratuity period and service shall be counted from the year succeeding the year in which they had taken their last maternity leave?

In the case cited above, any qualified and experienced HR can easily see through the ploy of the management to deny gratuity to an employee who has worked for nine years continuously.

It may sound harsh to some, but one should not continue to remain a frog in a well and interpret laws in one's own exploitative ways. I do not have words to describe such companies that indulge in such activities routinely. It also reflects on the caliber of their HR professionals and reinforces the fact that just anyone from any discipline becomes an HR manager in such companies; a concern that has been reflected time and again in this forum.

Warm regards.

If he has been chargesheeted and then warned and allowed to continue working, it will not amount to a service break. So, it will be considered as uninterrupted service.

However, I am not very clear on matters related to disciplinary action. So, I hope seniors will clarify.