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

Hi All, We have an employee who joined us, worked for 4 years, then went on maternity leave for 7 months (3 months fully paid and the rest of the days were without pay). After that, she came back and worked for another 2 years.

Queries on Gratuity Calculation

Some queries are:

1. What will be her total service considered for gratuity calculation?
2. Can we exclude her 4 months of unpaid period from the total service period for gratuity calculation?
3. In a general scenario, if someone takes a continuous one-year maternity leave and returns to work, what would be the gratuity treatment in that case?

Hello Anuradha, my views are:

Query No (1): The total service includes the period from the date of her joining to the date of her relieving from the service.

Query No (2): NO. It forms part of service unless the company passes an order treating it as break-in-service.

Query No (3): There is no provision under the Act for maternity leave for one year. Therefore, the question as to how the period of absence shall be treated depends upon the facts and circumstances of each case.

Hope this helps.

Regards, B. Saikumar Navi Mumbai

Gratuity and Service Continuity

The gratuity is payable for each year of continued service. Continued service means without a break. Since you have approved her maternity leave (it does not matter that it is without pay), it is not considered a service break. However, in each year, if the person has not worked for 240 days (or 180 days as per the court clarification), it is not a completed year. Therefore, I suppose if someone took a break for a year, then we do not need to pay gratuity for that year, but we need to pay for the remaining period.

Saikumar sir, please tell me whether the reasoning makes sense and whether the same can apply to 4 months of unpaid leave. The rules do not provide for a 1-year leave, but the management may give it on humanitarian grounds or for reasons of sickness.

Regards

The law states that 84 days have to be included, and any additional days (without capitalization) also have to be included if a medical doctor's certificate has been provided stating sickness related to maternity.

Hope this resolves your issue.

Be compassionate towards women, brother.

Thanks for the response. My views are as follows:

Understanding Continuous Service Under the Payment of Gratuity Act

Sec. 2A of the Payment of Gratuity Act, which defines 'continuous service,' envisages two situations where an employee can be said to be in continuous service. Under Clause (1), where an employee is in service for a period of five years or more until cessation, including breaks on account of leave or absence without leave, then he is said to come under the purview of 'continuous service' under Clause (1). In Anuradha's post, the employee falls under Clause (1) in my view.

Clause (2) considers cases where an employee is unable to be in service for a full year in each year of five years or more due to reasons beyond his control, such as layoff or artificial breaks. In such cases, the employee is considered to be in continuous service in each year if he completes 240 days (if not working underground) each year until his termination. The case under discussion, in my view, does not fall under Clause (2). Other views are welcome.

Regards, B. Saikumar

Gratuity Calculation for Maternity Leave

As per the Payment of Gratuity Act, continuous 5 years of service is mandatory for gratuity. Additionally, a minimum of 240 days of work in a year is required. In this case, you have to calculate based on her date of joining whether she has worked for 240 days in the fifth year of her service, especially during the year of maternity leave.

For example, if she joined on 15.01.2010, went on maternity leave on 15.01.2014, and returned on 16.08.2014, you need to count 4 complete years and determine the number of days she worked in the fifth year until 15.01.2015.

The three months of paid maternity leave will be considered as part of her working period, but the four months of unpaid leave will not be counted. This information should assist you in calculating the gratuity amount. Senior members of this forum may correct me if there are any mistakes in my understanding.

Regards.

M.B. Leave – LWOP

The normal practice followed in some manufacturing companies is to include all periods (as permitted in labor acts like the Maternity Benefit Act and leave rules as per the Factories Act) with pay/salary for calculating salary, allowances, leave earning, production incentive, performance incentive, bonus, gratuity, etc., and exclude those periods during which the employee has taken leave without pay (LWOP) for personal reasons. We may follow the M.B. rules and the Factories Act rule of 'earn and avail' for productivity and to maintain a uniform policy; otherwise, there will be grievances and complaints.

Request seniors to comment on the matter.

Regards, c.neyimkhan