Gratuity Eligibility Question: Can I Claim It Despite Being 36 Days Short of 5 Years?

Hi Amit Roy,

I joined on 10th Aug 2011, and my last working day was 4th July 2016. I was short by 36 days to complete my 5 years. Am I eligible to claim gratuity? There was no break of service during my service period. Please help me with an appropriate section to substantiate the claim.

Thanks

Your question is a debatable point. You are eligible for gratuity if you have completed 4 years and 240 days. However, the employer has the right to deny your claim. In that case, you should prefer to file a petition before the labour court and obtain orders for the claim on gratuity.

Dear Amit Roy,

You are eligible to receive gratuity according to the Gratuity Act. Even though the employer is denying the same, please approach the labor office along with relevant documents.

You are very much eligible to get the gratuity. Please fill out the required form and submit it within 30 days to the competent authority.

Eligibility for Gratuity Under the Payment of Gratuity Act, 1972

As per Section 4(1) of the Payment of Gratuity Act, 1972, gratuity shall be payable to an employee upon the termination of their employment after they have rendered continuous service for not less than 5 years:

i) On their superannuation
ii) On their retirement or resignation
iii) On their death or disablement due to accident or disease

Except for the above clauses, gratuity is payable in the case of death or disablement even if the employee has not completed 5 years of continuous service. Since you have not completed 5 years of continuous service, you are not eligible to receive the gratuity benefit.

If your employer has considered gratuity as a part of your CTC since the start of your service, there is a case law that may entitle you to receive the gratuity amount.

Regards.

Dear Royamitk,

You have not mentioned the worked days of the 5th year in service. If it is 240 days or more in the 5th year, you are definitely eligible for the gratuity benefits.

There are many court judgments stating that if any employee has completed 4 years and 240 days, then the employee is eligible for gratuity. Please submit the requisite form to the competent authority immediately without further delay.

Dear Mr. Saji,

I would be glad if you could share references of judgments where gratuity has been paid on completion of 4 years and 240 days.

Regards.

Eligibility for Gratuity Based on Supreme Court Judgment

As per the judgment of the Supreme Court, an employee is eligible for gratuity if they have completed 4 years of continuous service and 240 days of continuous working in the 5th year. On the day they complete 240 days in the 5th year, they become eligible for gratuity.

The judgment of the Supreme Court, rendered under the provisions of the Industrial Dispute Act in Surendra Kumar Verma vs. Central Govt. Industrial Tribunal, [(1980) (4) S.C.C.433)], states that it is sufficient for an employee to have a service of 240 days in the preceding 12 months. It is not necessary to complete one whole year's service. Since the definition of continuous service in the Industrial Dispute Act and the Payment of Gratuity Act are synonymous, the same principle can be adopted under the act. Hence, an employee rendering service of 4 years and 240 days is considered to have completed 5 years of continuous service under sec.4(2) and is thereby eligible for gratuity.

Now, almost all organizations are paying gratuity if an employee has completed 4 years of continuous service and 240 days of continuous working in the 5th year.

Regards

Judgment on Gratuity Eligibility by Madras High Court

The judgment delivered by the Madras High Court on the eligibility of gratuity is attached for the convenience of the querist.

1998 LLR 1072
MADRAS HIGH COURT
Hon'ble Mr. S.M. Abdul Wahab J.
W.P. No. 21350 of 1987
Decided on 12.6.1996
MetturBeardseU Ltd. (represented by Its Personnel Manager), Madras
vs.
Regional Labour Commissioner (Central)
(Authority under Payment of Gratuity Act), Madras & Others

Payment of Gratuity Act 1972

Sections 2(a), 2(b), 2(c), 2(e), and 2A - 'Continuous service' - Qualifying period of service by an employee – Entitlement of Gratuity - An employee rendering continuous service for a period of 240 days in a year will be deemed to have continued in service for 'one year' as stipulated by section 2A of the Act. Thus, an employee who has put in service for 10 months and 18 days for the fifth year subsequent to the first 4 years should be deemed to have completed continuous service of five years. His claim for gratuity is tenable.

Apart from the above, you can refer to the link below to have a better understanding: https://indiankanoon.org/search/?for...tuity+240+days

Dear Mr. Saji,

There is a judgment of the Madras High Court on a particular case, and that judgment does not have any impact on other cases. As per the act, a minimum of 5 years of service is required to become eligible for gratuity. Since there has been no amendment to the act based on the judgment, you cannot compel the employer to pay gratuity after 4 years and 240 days.

Dear Saji,

As an employer, we have trust and insured our gratuity through LIC. Even if they do not pay gratuity to any member if the service is less than 5 years, then from where do we pay gratuity to the employee? Various judgments come from time to time, and you can take judgment as a guideline when the act is not clear. Here the act is clear, so why should we follow the judgment or guidelines?

First of all, thank you for sharing the judgment. As Malik Sir rightly stated, judgments may be viewed and referred to in order to support proceedings of routine cases. However, from an employer's point of view, there is no point in referring to judgments only to reach a decision when clear-cut guidelines are provided in the Act. Don't you think that following only judgments will overlook the provisions of the Act? If only judgments are considered as a criterion, then why does the victim need to submit separate complaints in court? Courts give judgments to avail rights of victims in tune with the Act.

Sometimes judgments help in understanding aspects and applicability of the Act, but they can never supersede the Act. The Act is static and must be referred to as the primary source.

Based on my understanding and previous submission on the subject, this person will have to claim his gratuity before the Asst. Labour Commissioner of the concerned area. In such a scenario, the victim may submit this case law in his support. The competent authority will investigate it thoroughly and decide as appropriate.

Please don't take it otherwise. It is just sharing.

Regards.

My point of view is the same: let the employee claim his gratuity with the competent authority. The case law can be referred to file a fresh complaint to the court of law if required. However, it would not be appropriate to stop the employee from claiming his right to gratuity.

My earlier posts only state that the employee should claim first; the rest can be done later. There are ample lawyers available in India, as well as in this forum, who are competent enough to fight it legally and get the gratuity paid to the employee.

Regards

Gratuity Eligibility: Supreme Court Rulings

Mentioned below are extracts from Supreme Court of India rulings on gratuity payable to an employee who has completed 4 years and 240 working days in the 5th year of service. This information is provided by a good Samaritan for the viewers of Cite HR.

Clarity Between Gratuity Eligibility Service (5 or 4.8 years)?

The gratuity eligibility service as per the Gratuity Act 1972 is 5 years. However, according to the judgment from the Supreme Court and the quotation from the book mentioned below, it seems that the gratuity eligibility service is 4 years and 240 days.

"Judgment from Supreme Court:

"Yes, by virtue of the judgment of the Supreme Court rendered under the provisions of the Industrial Dispute Act in Surendra Kumar Verma vs. Central Govt. Industrial Tribunal, [(1980) (4) S.C.C.433)], it is enough that an employee has a service of 240 days in the preceding 12 months and it is not necessary that he should have completed one whole year’s service. As the definition of continuous service in the Industrial Dispute Act and Payment of Gratuity Act are synonymous, the same principle can be adopted under the act also, and hence an employee rendering service of 4 years, 10 months, and 11 days is considered to have completed 5 years of continuous service under sec.4(2) and thereby is eligible for gratuity."

Quotation from the Book:

Law Book (Bare Act, 2004) i.e., The Payment of Gratuity Act, 1972 (Publisher: Law Publishers () Pvt. Ltd., 18A-S.P. Marg, Post Box - 1077, Allahabad - 211001. Phone: [Phone Number Removed For Privacy Reasons]. Website: lawpublishersindia.com

1. 4 years and 6 months (190 days = 1 year) where the company follows a 5-day week.
2. 4 years and 8 months (240 days = 1 year) where the company follows a 5-day week.

Is eligible for gratuity. The Payment of Gratuity (Second Amendment) Act, 1984 clarifies this. One needs to calculate the number of years and service completion as follows.

A company which follows a 5-day week:

DOJ 01.05.2000 -

01.05.2000 to 30.04.2001 - worked for 190 days
01.05.2001 to 30.04.2002 - worked for 190 days

If we go by the above formula and if the person does not have any break in service, he will be eligible for gratuity on 01.11.2004."

The lack of clarity on this rule has created confusion among many employees. Some companies follow the 4 years and 240 days rule, while others follow the 5-year rule. Please help remove this confusion so that nobody's rights to gratuity are compromised. An expert lawyer may please give their comments and advice.

Regards

Dear Brother,

I think you are eligible to receive gratuity. The minimum requirement is 4 years and 240 days, while the maximum is 5 years of continuous service as per the Payment of Gratuity Act.

Regards,

P. Senthil
Coimbatore