Facing Layoff After 4.5 Years: Am I Eligible for Gratuity or Compensation?

I have worked in this company since September 2009. Now, due to bad market conditions, the company is downsizing, and hence staff is being asked to leave. I would have completed 5 years in September this year, i.e., 2014; however, I have been asked to leave by the 15th of this month (Mar-14), so I cannot meet the 5-year criteria. To be precise, I will be completing 4 years and 6 months this month.

I would like to know if I will be eligible for gratuity or any amount of compensation for my service. Also, I am not the one quitting the job, but the company has asked me to leave.

Kindly advise.

Regards,
S.

Gratuity Eligibility Criteria

Gratuity is payable if there is:

- Continuous service of 5 years (not necessary in the case of death or disablement).
- Termination due to superannuation or retirement.
- Resignation, death, or disablement due to accident or disease.
- In the case of death, the amount will be paid to the nominee or legal heir.

Clause

If a person has completed 240 days in a year on his/her fifth year of service, he/she is eligible for gratuity.

Dear Senior, I have come across one situation where an employee joined the company as a Trainee in April 2008 (where a stipend was being paid). In the next year, February 2009, he received a letter stating he was still a trainee but with the regular company salary structure, and the salary letter mentioned that "Gratuity applicable as per act." Subsequently, the employee received a permanent employee offer letter in April 2010.

Now, my questions are:

1. What will be his actual date of joining?
2. As per the letter given in February 2009, with PF contributions starting and the mention of "Gratuity applicable as per act," what will be his gratuity pay tenure? Will it be considered from February 2009 or April 2010?

Please reply with your suggestions. Urgent attention required.

Regards,
Kunal
[Email Removed For Privacy Reasons]

Gratuity Eligibility Inquiry

The primary condition for claiming gratuity is the completion of not less than 5 years of continuous service. Under Section 2-A, it is further provided that the employee shall be deemed to be in continuous service for a minimum of 240 days in a year, as must have worked. In your case, you are not fulfilling the above condition. However, on the grounds of cessation of work not due to any fault of the employee, you can claim gratuity.

I agree with Mr. Kunal. If you have not completed 5 years in your job, then you are not eligible to receive gratuity. However, if you have worked for five years and eight months, which is equal to 240 days or more, then it may be possible for you to claim gratuity.

Gratuity Eligibility After 5 Years of Service

Is it mandatory for companies to give gratuity on completion of 5 years?

Thank you.

Dear Miyashlr,

Regrettably, you will not be eligible for a gratuity. This is not an isolated case; it seems many companies are following the same trend, easing out employees just before they become eligible for gratuity.

What's even worse is that an employee who had completed nearly 6 years was denied (essentially cheated out of his eligible gratuity). The reasons provided were unconvincing—stating that the company had not set up a gratuity fund, and that when the employee joined, there weren't enough employees to even deduct PF. Therefore, the count for gratuity eligibility only began after the company fell under the ambit of PF. I was shocked to hear this fairy tale. The individual in question (whom I would rather refer to as the victim) is not aware of this rule. I am attempting to obtain this person's contact details so that I can advise them to make their legitimate claim.

Warm regards,

TSK. Raman

Yes, it is mandatory as per the provisions of the labor department. If the company has more than 10 employees, then the company has to create a gratuity fund for the employees. After completing 5 years on the job, the employee can access the fund. If the company does not have 10 employees, then it is not mandatory to pay gratuity.

Regards,
Sanjay Gahan
Manager - HR & Accounts

My suggestion is that, as per "The Gratuity Act," you're not eligible for the same. Request gratuity benefits and convey that you do not intend to quit the service, but the company wants you to leave due to bad market conditions. If they agree to this condition, then there is no problem. Otherwise, continue your duty until you become eligible, and in the future, you may need to visit the Labour Department for justice. Keep all this conversation recorded and be polite.

Regards,
Seetarama Moger
[Phone Number Removed For Privacy Reasons]

Date of Joining and Gratuity Tenure Clarification

Now my question is:

1. What will be his actual date of joining? - If he joined under the Apprentice Act, then his DOJ should be February 2009.
2. As per the letter given in February 2009, his PF contribution started, and the company also mentioned, "Gratuity applicable as per act." In this case, what will be his gratuity pay tenure? Will it be considered from February 2009 or April 2010?

He is not eligible for Gratuity, Bonus, ESI, but under the Factory Act, all safety measures should be provided to the Apprentice.

Regards,
Seetarama Moger

Gratuity Eligibility for Trainee Employees

The gratuity will be payable from the first day of service, irrespective of the employee's status. The designation of "Trainee" has been given by the company management. There is no exemption in the Gratuity Act to exclude trainee employees. Only trainees enrolled under The Apprenticeship Act 1961 qualify for exemption. The so-called designation of "Trainee" given by management is a matter of their convenience and has no value in law. No employer can evade their legal liability by designating their employees as trainees.

Eligibility Criteria for Gratuity

For eligibility for gratuity, an employee must complete a minimum of 240 days of physical attendance every year. Regarding the completion of 4 years and 240 days by an employee, they are eligible for payment of gratuity (as per the judgment of the Madras High Court). Upon completion of 240 days of physical attendance, the employee is deemed to have completed continuous service of one year (as per The Industrial Dispute Act - 1947).

Regards,
P.N. Pathak
[Phone Number Removed For Privacy Reasons]
SR HR Manager.

As per the Gratuity Act, if an employee works for continuous service for 5 years, they are entitled to receive gratuity. However, one must understand what constitutes continuous service and how it is calculated.

Continuous Service as per Section 2A

An employee shall be considered in continuous service for a period if they have, for that period, been in uninterrupted service, including service which may be interrupted due to 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 orders, rules, or regulations governing the employees of the establishment), layoff, strike, lockout, 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.

It further specifies that if an employee works for not less than 240 days in a year, it will be treated as one year for the purpose of Gratuity calculation.

In light of the above, you will not be entitled to receive gratuity assuming you have completed only 4 years and 6 months. You are compelled to leave the company as it is downsizing its manpower or closing down the establishment/factory due to the recession.

You may consider discussing the matter with the labor department to determine the future course of action. I am not aware of whether you have submitted your resignation or if the company has issued a letter asking you to leave. If the company has issued a letter stating that you resigned from the service, then you may contest the matter and seek advice from the labor department.

Regards,
Sibabrata Majumdar
Management Consultant Legal & HR
Kolkata, Mb: [Phone Number Removed For Privacy Reasons]

Gratuity Calculation Query

Please help with gratuity calculations. An employee has worked for 5 years and 6 months, but within this duration, the employee has taken 2 months of leave without pay (LWP). What should we consider in the number of years during the calculation of gratuity?

Regards,
Anu

Even after adjustment, since the employee concerned has completed the eligible level, he/she should be paid for the number of days he/she earned a salary. Please also note that this employee has to be then paid for 5 years and 4 months, calculating half of the last drawn basic salary for 26 working days (each month) multiplied by 64 months, to be fair indeed.

Warm regards,

TSK. Raman

On completion of 240 working days every year, and also in the 5th year, if any employee completes 240 days, then they are eligible for Gratuity.

Thanks,
Sirisha

In your case, gratuity is not claimable as you completed 4.6 years. Employees who complete 5 years are eligible for gratuity.

Example Scenarios:

1. If an employee resigns after 4 years and 10 months, they are not eligible for gratuity.
2. If an employee is dismissed after 4 years and 10 months, the company will not provide gratuity. However, if the employee wins a court case regarding the dismissal being unjust (subject to considering many facts), they can claim gratuity.

As far as the payment of gratuity for 4 years and 6 months is concerned, you have already received a clear answer that you will not be eligible for gratuity. However, if you could have completed 240 days in the 5th year, then your case may qualify for payment.

Compensation Eligibility

The second part of your query has not been replied to by any member. For other compensations, you are eligible. It depends on the work profile and the nature of the job.

If you are in a managerial or supervisor/administrator category, then the payment shall be according to your employment agreement. But in case you are not employed in a managerial or supervisor/administrative capacity, then you shall also be entitled to retrenchment benefits under the Industrial Dispute Act, which shall be 15 days' wages per year for each completed year of service.

Even otherwise, if you are working in an IT/ITES company, you can claim the same. Few State Shop Acts also provide for retrenchment compensation like AP, TN, etc., and the question of the applicability of the ID Act is a matter of debate. But if your claim can succeed.