How Should I Calculate Gratuity for My Long-Term Employment with Breaks?

Dear sirs,

Guidance on Calculating Gratuity

Kindly guide me on calculating the correct gratuity amount. I joined a proprietary firm in November 1993. The proprietary firm converted to a partnership in 1996 and then to a private limited company in 2006. I left in June 2008 and rejoined in November 2009. No gratuity was paid by the establishment. I finally left on September 30, 2017.

The company management wishes to calculate gratuity from 2009 to 2017 based on the basic salary of September 2017. Is this correct? There is no provision made in the audited balance sheet. Can I claim gratuity from 1993 excluding the break period? For the break period, what is the basis of calculation? Can I get any legal support as no appointment letter was given?

Thank you.

Dear Pujari,

The conversion of the same establishment into different forms or a change in its constitution from time to time is only a cosmetic change in respect of its legal liability for the payment of gratuity to its employees under the Payment of Gratuity Act, 1972. What is important is the continuity of the employer-employee relationship or the continuity of the service of the employee under the establishment.

In your case, your initial spell of continuous service from 1993 to 2008 came to an end by your leaving the establishment in 2008. You were eligible for gratuity for roughly about 15 years of continuous service, subject to the applicability of the Act to the establishment. In such a situation, the employer ought to have paid the gratuity within 30 days from the date of your termination or should have deposited the amount as per his calculation with the Controlling Authority under section 7(4)(a), and you ought to have made an application to the Authority immediately under section 7(4)(b) of the Act respectively. Your post is silent both as to why gratuity was not paid to you and why you did not make any application for gratuity forthwith. Therefore, you cannot club the previous spell of your service with the present spell commencing from 2009 after the break in 2008 and claim gratuity for the entire period from 2003 to 2017. The claim for the period of 2003 to 2008 is certainly barred by limitation, and one cannot be sure whether such a long and unexplained delay would be condoned by the Authority now.

As regards the second spell of 2009 to 2017, you are eligible to claim gratuity based on the last drawn salary (only basic + D.A) payable in the month of September 2017. The absence of provision for gratuity in the Balance Sheet of the Company cannot absolve the employer of his liability to pay gratuity under the Act. If you are desirous of making a claim for the first spell of your service, the last drawn salary payable for the month of June 2008 only has to be taken into account. In the absence of the issue of appointment orders either in 2003 or in 2009 or on both occasions, if it is disputed by the other side, you have to prove the fact of your continuous employment by means of any other documentary evidence such as a service card, wage slip, bank passbook in your possession or calling for attendance register, wage register, etc., in the possession of the employer.