Gratuity Calculation Dilemma: Should Maternity Leave Count Towards Service Years?

Hi seniors,

I need clarification regarding Gratuity. One of our employees worked a total of nine years in the company. However, she was absent during the maternity period for one year (including ESI leave of 84 days). My confusion lies in whether I have to calculate the gratuity including the absent period or if I can calculate the gratuity for eight years only. I am seeking suggestions from senior members.

Thank you.

Gratuity is usually paid to those employees who have completed 5 years of continuous service. Here, continuous service means (according to the Gratuity Act-1972):

Continuous Service

“Continuous Service” means uninterrupted service which may be interrupted on account of sickness, accident, leave, absence from duty without (not being treated as a break in service), lay-off, strike, lock-out, or cessation of work not due to the fault of the employee. (Sec 2A).

From the above explanation of continuous service, I would say the employee you mentioned is eligible to get gratuity for 9 years if her one-year maternity leave is not treated as a break in her service.

With Regards,
Mr. Thumbs Up

Maternity Leave and Gratuity Calculation

The maternity leave period of 84 days is certainly counted as days worked for the purpose of deciding continuous service for that year. However, the period beyond that will be unpaid leave, and unless the said leaves without pay are treated as approved leaves in her service records, she will lose one year of gratuity because she would not have "actually worked" for 240 days or more during that year. It is not necessary that all such leaves should be treated as approved leaves. Obviously, if the employee had interrupted service due to employment injury, the situation would have been different, and on such occasions, she would have been considered in continuous service for the year in which she was absent due to employment injury.

Normally, at the time of granting additional leave on a without pay basis, a consensus will be reached as to how it would be considered at the time of payment of gratuity by endorsing that "leave granted without pay on condition that these leaves will not be counted as days worked for the purpose of deciding the eligibility for and calculation of gratuity." Therefore, there is nothing wrong in disallowing one year of gratuity in such cases.

Regards,
Madhu.T.K

Mr. Praveen and Mr. Madhu have given a very exact and practical answer to your query. I would only add that before you take that one-year leave as a break in service, make sure that there was an order passed during the period when the employee was on leave to the effect that the long unpaid leave would not be considered for Gratuity purposes. If that order has not been passed with the employee in the loop at that juncture, then the employee would be eligible for Gratuity for the entire 9 years (including the leave without pay) as the order has not been passed.

Regards,
Ashutosh Thakre