Gratuity Eligibility Confusion: Should We Count 190 or 240 Days for Calculation?

Gratuity Eligibility and Calculation Days

We have an exiting employee who has served the organization for 4 years and 6 months. He has brought a paper from a lawyer providing calculations for gratuity based on 190 days per year instead of 240 days. Our organization follows an alternate Saturday off model. Could someone please guide us on whether he is eligible for gratuity and how many days should be considered for the calculation – 240 days or 190 days? If there are any relevant verdicts or court orders, please share them.

I look forward to your help.

Regards,
Manoj Kumar Anand
[Email Removed For Privacy Reasons]

Understanding Continuous Service Under the Act

The bare act reads as follows regarding continuous service:

1. [2A. Continuous service.] For the purposes of this Act:

(1) 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 on account of sickness, accident, leave, absence from duty without leave (not being absence in respect of which an order treating the absence as a break in service has been passed in accordance with the standing orders, rules, or regulations governing the employees of the establishment), lay-off, strike, or a 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.

(2) Where an employee (not being an employee employed in a seasonal establishment) is not in continuous service within the meaning of clause (1), for any period of one year or six months, he shall be deemed to be in continuous service under the employer:

(a) For the said period of one year, if the employee during the period of twelve calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than:

(i) One hundred and ninety days, in the case of any employee employed below the ground in a mine or in an establishment which works for less than six days in a week; and

(ii) Two hundred and forty days, in any other case.

The present case may not meet the requirement as you are working 6 days a week on alternate weeks. Consult your company legal advisor. Though the Act is welfare-oriented and beneficial application is to be done, this will become a precedent for other workers, etc.

Regards,
[Username]

A person is eligible for gratuity only after having 5 years of continuous service in a company, according to the Gratuity Act.

Again, 190 days are not applicable in this case.

Eligibility for Gratuity Calculation

Earlier, eligibility for the calculation of gratuity was determined only after an employee completed 5 years of service. In a recent judgment (I do not remember the case details), it has been clarified that any employee who has worked for 4 years and in the 5th year of service has worked for the minimum number of days stipulated in the act for considering as continuous service, namely, 240 days and 190 days as detailed by Mr. Nathrao, it has to be deemed as 5 years of service and will be entitled to gratuity. If you are not a mining company, only 240 days have to be considered.

Regards, bgramesh

Hi,

If you work only on alternate Saturdays, then technically you work less than 6 days a week.

Regards,
Amod.

As per the settled law, if an employee has completed 240 days of continuous service in the fifth year, he shall be eligible for Gratuity.

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Gratuity Eligibility Based on Court Verdict

As per the Gratuity Act, an employee must render continuous service for five years to avail of gratuity benefits. However, the Madras High Court, in W.P No-2135 of 1987, decided on 12.06.1996, stated that an employee rendering continuous service for a period of 240 days in a year will be deemed to have completed 'one year' as stipulated by section 2A of the Act. Thus, an employee who has served for 10 months and 18 days in the fifth year, subsequent to the first four years, should be deemed to have completed continuous service of five years. Therefore, his claim for gratuity is tenable.

Regards,
Somesh L.

One has to work for 240 days in the year, not 190 days to be eligible for Gratuity. Even after completing 5 years of service, Gratuity will only be paid for the years in which the individual works for 240 days.