Does Gratuity Apply if an Employee's Service Excludes Sundays and Holidays?

We have an employee whose date of joining is 18th Oct 2012, and the date of leaving is 31st July 2017. He has not completed 5 years. Please explain if he comes under gratuity since his "actual working days" (excluding holidays and Sundays) after 4 years are not more than 240 (though his period of service, including Sundays and holidays, is 4 years and 282 days).

Treatment of Qualifying Service for Gratuity

There are different views regarding the treatment of qualifying service. Two court verdicts point out that service of 240 days in the fifth year shall be considered as one year. Thus, gratuity shall be paid to those who leave the organization after rendering 4 years and 240 days of service. However, the Payment of Gratuity Act is very clear that to be eligible for gratuity, one must have a minimum of 5 years of service. According to the Act, 240 days are only the mandatory service to make a year's service continuous, and it has nothing to do with the minimum service required to make an employee eligible for gratuity.

Inclusion of Paid Days in Service Calculation

In both cases, 240 days of service should include all paid holidays, paid leaves, and weekly off days. For female employees, the days on which she was on maternity leave should also be considered as days worked. Therefore, if an employee worked for 282 days, including Sundays and holidays, they are deemed to have earned one year of continuous service. This applies to employees who are paid for their holidays and weekly off days and not to casual workers who are paid based on their physically present days.

Employer's Responsibility in Gratuity Payment

Since gratuity is a social welfare scheme for employees, the employer is advised to provide it irrespective of whether they accept the rulings of the Madras High Court or Kerala High Court.

Thank you, Ms. Madhu,

So, as per the Gratuity Act, is the above-mentioned employee eligible for gratuity, since he has not completed 5 years of service?

As per the Act, he is not eligible for gratuity. However, the appropriate authorities under the Payment of Gratuity Act in Tamil Nadu and Kerala order payment in such cases following the High Court verdicts in their respective states.

One more thing is that the verdict of a High Court need not be taken as something relevant only in the state but can be adapted and certainly applied in other states as well.