Am I Eligible for Gratuity After Exactly 4.11 Years of Service? Seeking Advice

Dear Sirs,

I have completed 4.11 years in my current organization, and my last day of work shall be exactly 4.11 years. Am I entitled to get Gratuity? Your help will be appreciated.

Regards,

Dear Pratik Avhad,

The minimum service required to be eligible for gratuity is five years. Therefore, you are not entitled to receive gratuity.

Abbas P.S

Dear Pratik,

You are entitled to gratuity, as 240 days or more of service in the last year of service is counted as a full year. So, having rendered 4 years & 11 months of service, you are eligible for gratuity equivalent to 5 years of service.

I am Sougat. My query is: if a private limited company has 22 working days in a month, how do we calculate the gratuity? Should the calculation be based on 22 days or 26 days?

Thank you.
Sougat Das

Dear Pratik,

You are eligible to receive Gratuity if the service is more than 4.8 years. Employees can be eligible for gratuity after completing 4.8 years of service.

Dear friends,

Here, the query is regarding 4.11 years. 0.11 years is equal to 0.11 x 12 = 1.32 months. How is an employee eligible for gratuity with a service of 4 years and 1.32 months?

Abbas.P.S

Any employee completing 240 days of continuous service in the fifth year is eligible to receive gratuity. As you have completed 240 days in the fifth year, you are entitled to receive gratuity.

One or two local decisions are there considering the service referred in. As a general gratuity rule, one has to complete 5 years.

Understanding the Gratuity Act

The 'Gratuity Act' very clearly states that the period of service has to be 5 years. This period of service is counted from the starting date of employment to the last day of employment. If this period of service is a minimum of 5 years, then the employee is eligible for gratuity. In case the employee dies during the service period before completing 5 years, gratuity is payable, and the nominees will be the beneficiaries of the gratuity.

Eligibility Criteria for Gratuity

In cases where the employee does not work a full year during any of the years while in service, such as working intermittently or taking various kinds of leave with or without pay, or there has been a strike or lockout, if the employee has worked for 240 days during the year (including eligible leave or holidays, etc.), then that year will be counted as a completed year. If the employee has worked for a minimum of 240 days per year for 5 continuous years, they are eligible to receive gratuity, provided five years have elapsed from the start of employment to the end of employment. If the period of employment from start to end is 4 years and 11 months, the employee is not eligible for gratuity.

It's making the discussion full of confusion. As simple as any employee who completes 5 years in service is only eligible to get Gratuity as per the Payment of Gratuity Act. Please refer to the Act diligently.

Dear Pratik,

As Mr. Dhingra has already informed you, you are eligible for gratuity. While it is commonly understood that one must complete 5 years of continuous service to qualify for gratuity, the definition of continuous service specifies that a year consists of 240 days of service. Therefore, when you completed 4 years and 11 months, you met the eligibility criteria.

This interpretation is based on the Madras High Court Judgment of Mettur Beardsell Ltd. Vs. Regional Labour Commissioner, where Justice S. M. Abdul Wahab ruled that completing 4 years and 240 days makes one eligible for gratuity.

Gratuity Calculation

Regarding Mr. Sougat Das's query, even if a company operates for 22 days a month, gratuity is calculated by dividing this by 26. The formula is as follows:

Gratuity Calculation = [(Basic Pay + D.A) x 15 days x No. of years of service] / 26

Where D.A = Dearness Allowance.

Let's consider an example:

Given Basic Pay = 17500, DA = 1500, and Years of Service = 25

Solution:

Gratuity = ((17500 + 1500) * 15 * 25) / 26 = (19000 * 375) / 26 = 7125000 / 26 = 274038.461

Therefore, the gratuity amount is 2,74,038.461

If you divide this by 22, = 7125000 / 22 = 3,23,863.64

It is entirely up to you whether you wish to pay at a higher rate, as the Gratuity Act, under Section 4 Subsection 5, states, "Nothing in this section shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer."

Feel free to provide more than the calculated amount. However, be aware that if you opt to pay a higher gratuity, this may establish a precedent, requiring you to maintain the same standard for all employees in the future. If you have any further questions, please do not hesitate to reach out.

Thank you.

Regards

Dear Members,

Gratuity Eligibility: 4 Years and 11 Months of Service

According to some of the learned members, gratuity is not payable for 4 years and 11 months of service. However, other learned members, including Advocate Mr. Kamal Kant Tyagi and a very senior member, expert, and legal analyst Mr. P S Dhingra, assert that gratuity is payable for 4 years and 11 months of service.

In response to the discussion in this thread, only one learned member, kumaracme, voted against gratuity being payable for 4 years and 11 months of service, while four learned members voted in favor of it being payable.

I am confused. What is the correct answer?

Request for Expert Opinions

This forum has discussed this topic on many occasions with different views. There is no conclusive answer to this query. Below is a link to one of the threads on a similar topic. I request the learned members, including Advocate Mr. Kamal Kant Tyagi and the very senior member, expert, and legal analyst Mr. P S Dhingra, to provide comments once again in light of the link provided below.

https://www.citehr.com/108564-sc-jud...-download.html

In the present thread, the initiator of the thread is from Mumbai, as indicated in his profile.

Regards

Key Words for Eligibility of Gratuity

At least 5 years of service - Continuous

Continuous Service Means:

An employee shall be said to be in continuous service for a period if he has, for that period, been in uninterrupted service. This includes service which may be interrupted due to sickness, accident, leave, absence from duty without leave, layoff, strike, lock-out, 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.

Where an employee is not in continuous service for any period of one year or six months, he shall be deemed to be in continuous service under the employer:

- If for the said period of one year he has worked for 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 two hundred and forty days in any other case.
- If for the said period of six months he has actually worked under the employer for not less than ninety-five 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 one hundred and twenty days in any other case.

The number of days on which an employee has actually worked under an employer shall include the days on which:

- He has been laid-off under an agreement or as permitted by standing orders made under the Industrial Employment (Standing Orders) Act, 1946, or under the Industrial Disputes Act, 1947, or under any other law applicable to the establishment.
- He has been on leave with full wages earned in the previous year.
- He has been absent due to temporary disablement caused by an accident arising out of and in the course of his employment.
- In the case of a female, she has been on maternity leave; however, the total period of such maternity leave must not exceed twelve weeks.

In the case of employees in seasonal establishments, he shall be deemed to be in continuous service for any period of one year or six months if he has actually worked for not less than seventy-five percent of the number of days on which the establishment was in operation during such period.

In my interpretation, a person has to complete five full years of service, out of which if he worked 240 days in the last year, he should be entitled to gratuity.

Understanding Gratuity Eligibility: A Landmark Judgment

I have not come across any Supreme Court decision on the eligibility of Gratuity. Even the Controlling Authority under the Payment of Gratuity Act relies on the Madras High Court judgment of Mettur Beardsell Ltd. vs. Regional Labour Commissioner. Justice S. M. Abdul Wahab delivered a great judgment, which is a clear and just interpretation of the provisions of the Act. When I read this judgment for the first time, the eligibility became crystal clear to me: four years and one continuous year in the fifth year. True, if one continuous year is 240 days of work, then 240 days worked in the 5th year must be the eligibility for Gratuity. Nobody disagreed with it; hence, it never went past High Courts. Mettur Beardsell Ltd. vs. Regional Labour Commissioner is a landmark judgment and currently the law of the land. So I strongly suggest reading the judgment; it will clear any doubt anybody may have.

Clarifying the 240 Days Requirement

One more thing, 240 days are not 240 working days; it includes weekly offs (whether one or two in some companies), paid leaves, holidays, layoffs, and legal strike days for which payments are made to workmen. The legal world unambiguously relies on this judgment, and by relying on this, there is nothing wrong legally. Think from your own judicious mind. Gratuity is beneficial legislation, and we will have to give it the most liberal and just interpretation when it comes to giving any benefit to workmen under this Act.

Hope this clears any doubt in the minds of worthy members.

Regards

Mr. Pratik, I am Nandi, and you are eligible for gratuity. You can check the Madras High Court judgment. Once 4 years and 6 months are completed, the judgment states that gratuity is eligible.

So many observations have been made by our learned members. However, the requirement of the first five years of service is a must for eligibility for gratuity. The courts have given a judgment for 4 years and 11 months based on the dispute raised before them. But as per the act, it is not so.

Dear Pratik, you are not entitled to payment of gratuity. The 240-day concept is applicable for eligibility criteria after the entitlement of gratuity. Suppose an employee has completed 9 years of service. So, he is entitled to payment of gratuity. However, if in his attendance record it is found that he had not completed 240 days in the 7th year, this 7th year will not be included if the person was taking authorized leave as mentioned in the act. Therefore, his 7th year will not be considered for continuous service, and for that year, he will not be entitled to payment of gratuity.

As you have not completed 5 years of service, if you have completed 240 days for the last year, you will still not be entitled to payment of gratuity as per the act. However, if your employer considers this as another case or if you worked as a trainee (other than an apprentice) before that in this company, this period will be included in your total tenure of service. If it surpasses 5 years, you will be entitled to payment of gratuity.

I am working on a contractual basis job in the Ministry for the past 5-6 years. Can I claim gratuity even though the contractor changed after 4 years and 9 months? My service has continued under another contractor within the same Ministry.

Dear Subhasis, The 240-day concept is not applicable after the eligibility of five years. Could you please share some provisions or case law to support your statement in your post? I kindly request that you refrain from making frivolous comments that are not based on concrete legal facts. Just to clarify, after five years of service, a person who works even six months, which is just 180 days in a year, is entitled to gratuity for the whole year. The requirement of 240 days is not accurate. I recommend reading the Act in its entirety. This information is provided under Section 4, Subsection 2, and is reproduced below for your reference:

(2) For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days' wages based on the rate of wages last drawn by the employee concerned.

Please avoid causing confusion among other members. If you have any questions, please ask directly, and if you wish to share information, ensure it is accurate. Incomplete or incorrect information can be misleading and potentially harmful.

Best regards, [Your Name]

Time and again, it is clarified that although some High Courts have given judgments allowing gratuity for less than 5 years, the general position remains unchanged. Therefore, completing 5 years still stands. Our debates do not break the ice. The concerned authority should issue an order based on the court decision, and until that time, there is no way to receive gratuity for less than 5 years.

Dear Kamal Kant ji (Advocate), Thank you for your spontaneous response to my query. I have another question now. With all due respect to you, sir, I would like to ask you to clarify the ambiguity in this subject.

I am from Mumbai. If I deny gratuity to an employee who has served for 4 years and 240 days in the fifth year, would it be considered contempt of court or a breach of the law?

This question came to mind based on your previous response stating, "if there is no contrary judgment on a given point from your High Court then the other High Court Judgment will prevail as the Law of the Land." To the best of my knowledge, there is no contrary judgment in the Mumbai High Court.

Thank you.

Dear All,

Thank you all for your inputs.

Please note that I have received the Gratuity after four years and eleven months of service. I believe the eligibility requirement is four years plus 240 days in the fifth year.

Thanks again,
Pratik

Congratulations on receiving gratuity from your employer despite having served less than 5 years. I assume you are not from Chennai or Kerala State. Although your employer has provided you with gratuity for a period of service less than 5 years, it does not necessarily mean that you are legally entitled to it. I prefer not to elaborate further on this matter. Our purpose on this forum is to discuss the provisions of the law, not the practice of law. Any employer has the freedom to offer you more than what is mandated by the law.

Regards

It is unfortunate that this question is pending for so long without a clear-cut answer acceptable to all. When the Act was originally passed, I believe the 'spirit' of the Act was to provide the benefit to employees who have completed 5 years of service (that is, 5 years between the joining date and the exit date). I believe that if the lawmakers wanted to provide gratuity after 4 years and 240 days, they could very well have said so. The point is, in the courts, the law can be interpreted or misinterpreted according to one's convenience and convincing (or confusing) arguments. While the Courts will defend the letter of the law, who will defend the 'spirit' of the law? Parliament?? I think an Amendment to the Act has to come from Parliament stating the exact minimum period. Time for another signature campaign.

I work for the Ministry on a Contract Basis under the Contractor. The Previous Contractor I worked under for 4 years and 6 months, and I have worked 1 year under the current Contractor. Contractors change from time to time, but I have been working regularly in the same Ministry and in the same designation. I have completed a total of 5 years and 9 months. Can I claim gratuity? Please help me, sir.

Dear Rahul Modi ji, I apologize for asking you a direct question. I noticed some inconsistency in your replies to the same question in two separate threads. In this particular thread, you mentioned that gratuity is payable even for service of less than 5 years. However, in another thread, you stated that the employee must complete 5 years of service.

https://www.citehr.com/535453-gratui...st2249190.html

I would advise you to read the comments of other knowledgeable members and acknowledge their perspectives. Alternatively, it would be better to refrain from commenting if you do not agree. If you have a different viewpoint, please present it logically instead of requesting members to contact you via phone.

Thank you.

Mr. Pratik, as per the Gratuity Act, for entitlement of gratuity, a minimum of 4.6 years of service is required.