Is Mr. X Eligible for Gratuity After 5 Years with Varied Workdays? Let's Discuss!

Gratuity Eligibility and Calculation

Kindly let me educate you regarding the eligibility and calculation of Gratuity in the below situation. As per the Act, I consider 5 years of continuous service for eligibility and 240 days for one completed year.

This is a general query: If "X" joined on 01.01.2009 and worked as follows:
- 1st Calendar year: 285 days
- 2nd Calendar year: 300 days
- 3rd Calendar year: 170 days only (due to LWP)
- 4th Calendar year: 299 days
- 5th Calendar year: 242 days

Mr. "X" has been in continuous service without a break. However, he resigned exactly after completing 5 years of service, on 02.01.2014.

Under such circumstances, is "X" entitled and eligible for payment of Gratuity, and if so, to what extent?

Thanks for the guidance in advance.

Eligibility for Gratuity Under the Payment of Gratuity Act, 1972

According to Section 4(1) of the Payment of Gratuity Act, 1972, gratuity shall be payable to an employee upon the termination of his employment after he has rendered continuous service for not less than five years: (a) on his superannuation, (b) on his retirement or resignation, or (c) on his death or disablement due to accident or disease.

Further, the period of continuous service is to be reckoned from the date of employment and not from the date of commencement of this Act. Mere absence from duty without leave cannot be said to result in a breach of continuity of service for the purpose of this Act.

If the date of joining is on 01 Jan 2009 and the employee has worked for five years, as you mentioned, for 242 days, the employee is eligible for gratuity. There is no doubt about it.

Regards

I really appreciate and thank you for your response. However, I still want some further clarification, keeping all the above positions intact. If the situation is slightly changed for working days of the 3rd and 5th year, it would be as follows:

If "X" worked for the 1st calendar year - 285 days; If "X" worked for the 2nd calendar year - 300 days; If "X" worked for the 3rd calendar year - 242 days; If "X" worked for the 4th calendar year - 299 days; and If "X" worked for the 5th calendar year - 170 days only (due to LWP).

Is this a fit case for Gratuity, then?

The above query is still open and unanswered. May I request the forum to please share your expert opinion on the same in line with the legal provisions of the Act?

Thanks.

Even in the hypothetical case later presented, the eligibility for gratuity of the employee on account of his resignation on 02-01-2014 is not in dispute as he was on the rolls of employment of the employer ever since his joining on 01-01-2009, i.e., for 5 years. Now, the pertinent question, therefore, is whether he is entitled to gratuity for all these 5 years or only for the first consecutive 4 years since the number of days he actually worked in the 5th year is only 170 days due to Leave Without Pay. Will the Questioner be kind enough to read once again in its entirety Section 2-A of the Payment of Gratuity Act, 1972, which defines "continuous service" for the purposes of the Act?

Understanding Continuous Service Under the Payment of Gratuity Act

For the purpose of entitlement of an employee to gratuity for a period, sub-section (1) of Section 2A creates a legal fiction in respect of the meaning of the term "continuous service" comprehended commonly out of the actual meaning the phrase conveys, and sub-section (2) explains the fiction thus created. The fiction created by the Statute under sub-section (1) of Section 2A is "Uninterrupted Service" inclusive of "certain interruptions" viz., (1) sickness, (2) accident, (3) leave, (4) authorized absence from duty without leave as per standing orders, rules, or regulations in force, (5) lay-off, and (6) strike or a lock-out or cessation of work not due to any fault of the employee. Sub-section (2) of Section 2A explains the fiction with reference to the number of days the employee concerned actually worked in the contingent of the impossibility of notional reckoning of continuous service as stated previously. Here again, by the explanatory note to the sub-section, the absence of the employee due to permissible lay-off, authorized leave with full wages, temporary disablement caused by any employment accident and in the case of a female, permissible maternity leave are to be notionally included in the actual number of days worked.

Clarifying the Confusion

Seems a bit confusing? Actually not so, if one makes an isolated reading of sub-section (1) at first for the purpose of determining continuous service for gratuity and then only proceeds further conjunctively with sub-section (2) only in the case of impossibility. In other words, in a period, if the employee's service remains uninterrupted inclusive of the specific interruptions mentioned therein in sub-section (1) of Section 2A, he is straight away entitled to gratuity irrespective of the days he actually worked. Otherwise, you have to be on the lookout for the minimum number of days he actually worked in the light of the explanation to sub-section (2) of Section 2A to determine his entitlement.

Conclusion on Gratuity Entitlement

Coming to your question, if the Leave Without Pay is permitted in the rules/regulations/standing orders of your establishment, he is entitled to gratuity for the 5th year though his actual number of working days is only 170. Otherwise, he is not entitled to gratuity only in respect of that year.

With your permission and with due respect to you, sir, I would like to make a correction to the above quote. I am sure it is an error made inadvertently while typing. The above quote should be:

He is entitled to gratuity, INCLUDING for the 5th year, even though his actual number of working days is only 170. Otherwise, he is not entitled to gratuity only in respect of that year.

I accept your correction with thanks. I hope you still remember the lengthy debate in this forum a year ago regarding the eligibility criterion for gratuity based on the qualifying service of not less than 5 years. When the learned friend who took a contrary viewpoint cited the judgment of the Madras High Court in the Mettur Beardsel case, I ceased my further arguments in that thread with due respect to the view of the Hon'ble High Court of Madras. This was based on the specific circumstances of the case in which the claimant ceased to be an employee (as the definition stood then) at the end of the 5th year due to his promotion. Even though the claim arose after he continued his service under the same employer for some more years, I acknowledged the limited scope of applicability of a rule laid down by any High Court. Once again, thank you.

Kind regards