Gratuity Calculation for 5.5 Years of Service: Should We Round Up the Service Period?

Dear Experts,

How to calculate gratuity in the case of an employee with 5 years and 6 months of service? Should we round the service period for calculation purposes? Kindly provide the law reference along with the clause number that specifies the calculation method for rounded service.

Regards,
Avinash Sankpal

As per Section 4(2) of the Payment of Gratuity Act 1972, gratuity is payable for completed years of continuous service, and continuous service in excess of six months is treated as a completed year. Section 4(2) is extracted below:

(2) For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days' wages based on the rate of wages last drawn by the employee concerned:

Thank you, Expert, for your kind reply.

As per the above section 4(2), if an employee's service is 5 years & 6 months, it is to be considered as 6 years for gratuity calculation.

On the other hand, if an employee's service is 5 years & 5 months, at that time, we have to calculate based on 5 years only. Is this correct or wrong? Please revert for a clear answer with a reference to the law.

It has to be in excess of six months; that is the import of Section 4(2). Just six months would not add up to one additional year. So, obviously, 5 years and 5 months would qualify for only 5 years of continuous service as per the Act.