Gratuity vs. Provident Fund: Will I Get Gratuity for My Last 6 Months at Work?

If a person has worked for a company for three years (e.g., Jan 2012 to Dec 2015) where the policy was to give only PF, and in Jan 2016 the person leaves, but the company policy had changed in July 2015 to give only gratuity, will this employee get 6 months of gratuity or not, considering they are entitled to receive 2.5 years of PF already accumulated?

Understanding Gratuity and Provident Fund

Gratuity and Provident Fund are two different social security measures. You cannot have a policy wherein you have only either PF or gratuity. PF is an amount invested in the Provident Fund and is returned to the employee when they leave. It is returned irrespective of the time spent in the company. At the same time, gratuity is available to the employee when they leave the company after completing a certain period of service, i.e., 5 years. You cannot stop paying PF and say that from now onwards you will have gratuity only. These are two separate rules.

If you have worked for 3 years or 4 years, you can either withdraw the PF or transfer the same to the new PF account opened at the organization where you join after leaving this company. Since you have worked for less than 5 years, you cannot have gratuity from the company.

Clarification on Gratuity Eligibility

What is the significance of 6 months' gratuity is not clear to me because gratuity is payable once an employee leaves the company after completing 5 years with the company. Again, I don’t understand why it is 2.5 years when you have contributed PF for 4 years (Jan 2012 to Dec 2015).

Regards, Madhu.T.K

If the company has twenty employees, both EPF and gratuity shall be paid. If it has only ten employees, only gratuity is applicable. The policy is immaterial.

Employee Benefits: PF and Gratuity Guidelines

If you have fewer than 10 employees, neither PF nor gratuity applies.

If you have between 10 and 19 employees, gratuity is payable to all employees who work for more than 4 years and 9 months.

If you have 20 or more employees, PF is compulsory. Your company must register and deposit the PF amount in the account for each person working, and gratuity is mandatory as well since you have more than 10 employees.

Even if PF was not compulsory but the company deducted it, you are eligible to get it back with interest at 8.5% per annum.

Thank you.