Gratuity Confusion: Should Companies Follow 5 Years or 4 Years and 240 Days Rule?

As per the Act, 5 years of service is required for Gratuity eligibility, and there has been no amendment to this provision. However, concerning Court orders, companies calculate gratuity eligibility based on 4 years and 240 days of service. Many companies are currently following both approaches. Can anyone clarify which method is the correct one?

Both are correct because if an employee leaves the company without completing nearly 5 years, he will lose his gratuity. Therefore, the court directs to protect the employee's gratuity so that the employee can still receive gratuity for 4 years and 240 days.

Regards

Gratuity Payment for Contractual Laborers

As per the verdict of the Madras High Court in 2006, the Principal Employer (PE) is liable to pay gratuity to contractual laborers who have worked for 5 years or more. Can anyone clarify the payment procedure?

For example, A has been working for 10 years in a company under the payroll of B, C, and D. His last employer is D, and he has been working under D's payroll for the past 3 years. A has decided to leave the job and has requested payment of all his outstanding dues, including gratuity. The question now arises: who will be responsible for paying the gratuity and how will it be done?

Regards.

It is true that the 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. However, sometimes a problem arises regarding whether an employee is required to be present on all working days in a year. It is for this reason that the Act has clarified under its Section 2A that for the calculation of the period of one year, if an employee, during the twelve calendar months preceding the date for which the calculation is to be made, has actually worked under an employer for not less than two hundred and forty days in an establishment that operates for not less than six days in a week, then the employee is eligible for the payment of gratuity.

Regards,
BS Kalsi
Member since Aug 2011