Gratuity Calculation Dilemma: How to Handle Absence in the 5th Year of Service?

Dear Seniors,

An employee left the service after completing 5 years and 8 months. During his 5th year of service, he was continuously absent for 6 months due to personal reasons, and no salary was paid for this period.

Gratuity Calculation Query

In this case, how can we calculate gratuity? According to Section 2A, an employee who renders continuous service for 240 days in a year will be deemed to have continued in service for one year. Is the following calculation correct?

Date of joining: 01.06.2008
Date of leaving: 28 Feb 2014
Absented himself without leave (without pay): 6 months from 16.08.2012 to 28.02.2013

Total years of service = 01/06/2008 to 28/02/2014, 5 years 9 months
minus - continuous absent period of 6 months

Hence, the total service is 5 years and 3 months.

Is it correct to pay gratuity for 5 years, or is it mandatory to pay 6 years of gratuity?

Your immediate advice is very helpful.

Thank you.

Please once again read Section 2A(1) of the Payment of Gratuity Act, 1972 carefully. The period of absence in the fifth year has to be taken into account as uninterrupted service because presumably, you have not passed an order treating this period as a break in service.

Regards,

If an employee, after providing continuous service of more than five years, proceeds on leave (long leave without pay), then his period of absence from duty cannot be treated as a break in service. Has this period of leave already been sanctioned by management? If so, please release his full gratuity payment from his date of joining up to his date of separation.

Thank you.

Regards,
R K Nair

In calculating gratuity entitlement, the total years of continuous service have to be reckoned from 28.02.14, the end date of employment, when gratuity became due and payable, and worked backwards. For example, from 28.02.14 to 1.3.13, 28.02.13 to 01.03.12, 28.02.12 to 01.03.11, 28.02.11 to 01.03.10, 28.02.10 to 01.03.09, and 28.02.09 to 01.03.08. The gratuity entitlement would be for each such year where the individual completes 240 days of service, including sanctioned leave, accident, layoff, or a lockout, etc., where there is no express order of interruption in service. Shri RK Nair has given a correct interpretation of the legal provision.

Regards,
KK

Please let me know if a workman has completed 15 years of continuous service but was a habitual absentee and did not complete 240 days of service, including leaves, etc. Should we be paying gratuity for those years?

Secondly, if he resigns from his services in December 2018 and has been remaining absent since September 2018, should we be paying gratuity for the year 2018 of his last year of service?

Regards,
Sanjay Srivastava