Am I Eligible for Gratuity After 4 Years and 9 Months? Seeking Clarity on Rules

Dear Seniors,

I worked for a private company for 4 years, 9 months, and 16 days. When I asked HR about my gratuity, I was informed that I am not eligible as I need to complete 4 years and 11 months. I have heard that employees who complete 4.8 years are eligible for gratuity. Can anyone help me with this and confirm if I am eligible for gratuity? Is there any government or labor notification regarding gratuity eligibility?

Thanks & Regards,
Anand

You are eligible for gratuity. Please see the summary for more details.

Gratuity Eligibility

According to the law, an organization has to pay gratuity to an employee who has served it continuously for at least 5 years. For each year of service, the organization has to pay an amount equaling 15 days of the last drawn salary. Salary here means basic salary plus dearness allowance plus commission if the commission is a fixed percentage of sales. Moreover, if a person works for over 6 months in the last year of service, it will be considered as a complete year for gratuity calculation. For instance, if a person completes 4 years and 6 months of continuous service, the gratuity paid will be for 5 years.

Thank you, Pradeep. Could you please send me any government or labor notification stating that individuals with 4.6 years of service or more are eligible for gratuity? I would like to present this to my HR.

Additionally, I am curious to know who is responsible for deciding the payment of gratuity – the company or another entity?

Thanks & Regards,
Anand

Understanding Continuous Service for Gratuity Eligibility

The rule states that 5 years of continuous service are required. Five years of continuous service means 4 years and 240 days of work in the last year if the office is open on Saturdays, and 4 years and 190 days if the office is closed on both Saturday and Sunday.

If a worker has provided uninterrupted service for 4 years and 240 days, according to the Gratuity law in India, they will be deemed to have completed 5 years of continuous service and will be eligible for gratuity upon termination of their service due to superannuation, retirement, resignation, death, or disability.

Definition of Continuous Service

Continuous service for one year is defined as uninterrupted service for at least 240 days in that year. When calculating uninterrupted service, interruptions due to sickness, accidents, leave, absence from duty without leave (unless officially treated as a break in service), lay-off, lawful strike or lock-out, or cessation of work without any fault of the employee should not be deducted and shall be considered part of uninterrupted service.

Therefore, the employee must ensure that all these conditions are fulfilled within the 5-year period before determining their entitlement to gratuity.

Case Law: Mettur Beardsell Ltd. vs. Regional Labour Commissioner

There is a case law, 1998 LLR 1072, from the Madras High Court, W.P.2135 of 1987, decided on 12.6.1996, involving Mettur Beardsell Ltd., Madras vs. Regional Labour Commissioner (Central) (Authority under Payment of Gratuity Act), Madras & Others.

Payment of Gratuity Act, 1972: Continuous Service

A. Under the Payment of Gratuity Act, 1972, Sections 2(a), 2(b), 2(c), 2(e), and 2A, 'Continuous service' pertains to the qualifying period of service by an employee for entitlement to 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 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. Hence, you are eligible for gratuity.

Don't worry about gratuity, all you need to do is check how many leaves you have taken in total. That should match 4 years 240 days if working for 6 days and should match 4 years 190 days if working for 5 days.

To clarify further, it is enough to have 4 years and 240 days of continuous service to claim gratuity. It is not necessary for one to complete the full 5 years of service.

100% You are eligible for Gratuity. As per government rules, gratuity is calculated for 240 days per year only. Therefore, 4 years and 9 months is enough to qualify for gratuity.