Am I Eligible for Gratuity After 8 Years in a Self-Financing College? Seeking Advice

Hi, I've been working as a faculty member in an aided arts and science college since 2007 in a city in Tamil Nadu, but under the self-financing department. PF has been deducted from my salary starting the month after my joining. Now, I've completed almost 8 years of service and plan to resign from the job. When I inquired at the college, I was told that gratuity is payable only after a service period of 10 years, and so far, this has been the procedure. Please suggest if I’m eligible to claim the same?

Regards,
Lal

Gratuity Overview

Gratuity is a reward in the form of money given by an employer to an employee upon termination for past services. The Payment of Gratuity Act 1972 applies to the whole of India except the State of Jammu and Kashmir.

Application of Gratuity Act [Section 1]

Every mine, factory, oilfield, port, plantation, and railway company is covered. Every establishment or shop, as defined by any law in force in a State, where ten or more employees are or were employed on any day in the preceding twelve months is included. Such classes of establishments, where ten or more workers/employees are or were employed on any day in the preceding twelve months, as notified by the Central Government of India in the Official Gazette, are also covered. If the provisions of the Gratuity Act 1972 become applicable to an establishment or shop once, the Act shall continue to apply even if the number of workers/employees falls below ten at any time in the future.

Eligibility for Gratuity under the Gratuity Act 1972

A worker/employee is eligible to receive gratuity if they are employed in a shop or establishment to which the Gratuity Act applies (Section 1), are an employee as per Section 2(e), and have been in continuous service for not less than five years, subject to some exceptions.

Application Process [Section 7]

The employee shall make a written application to the employer within thirty days from the day gratuity becomes payable. If the date of termination, superannuation, or retirement is known in advance, the employee may apply in writing to the employer before thirty days of termination, superannuation, or retirement.

Determination by Employer [Section 7]

The employer needs to determine the amount of gratuity as soon as it becomes payable. The employer also needs to provide a notice specifying the amount of gratuity to the employee and the controlling authority. Note: It is the responsibility of the employer to determine the amount of gratuity and provide notice to the employee and controlling authority, irrespective of whether an application for payment of gratuity has been made or not.

Payment of Gratuity

Time limit: Within thirty days of gratuity becoming payable. Maximum Amount: Currently, the maximum gratuity amount is Rs. 10,00,000. Under the terms of a contract, settlement, or award, an employee may be entitled to better terms of gratuity. Such a contract, settlement, or award shall be valid and effectual.

Mode of Payment of Gratuity

Gratuity can be paid in cash, by cheque or demand draft if desired by the payee, or by postal money order if the gratuity payable amount is less than one thousand, after deducting the commission payable, if desired by the payee. Note: The details of gratuity payment shall be sent by the employer to the controlling authority.

Hopefully, now you might have got the idea.

Regards

Gratuity Calculation Example

Here again, I am sending a simplified example to calculate gratuity. If you find it a bit confusing, I am also attaching a simple Excel file. You can write the formula on your own.

The gratuity rule is as follows: Last Basic/26 Days X 15 Days X Number of working years. For example, if someone worked for 6 years and their last Basic was 5000 (at the time of their exit), you can calculate as follows: 5000/26 to get the per day amount. Then, multiply the per day amount by 15 days to get the per year amount. Finally, multiply the per year amount by 6 years (number of years worked) to determine the gratuity liability.

You are eligible for gratuity since you have completed 5 years of continuous service with the college. There is nothing under the Act that restricts the payment of gratuity to employees with more than 10 years of service.

Madhu.T.K