Gratuity Calculation Dilemma: How to Handle Long Absence in a 21-Year Service?

Gratuity Calculation for Employee Resignation

An employee resigns from service after completing 21 years and 1 month. During his service, he was absent continuously for 1 year and 7 months due to personal reasons, and no salary was paid for this period. In this case, how can we calculate gratuity?

Date of joining: 09.06.1997
Date of resignation: 06.07.2018
Date of relieving: 11.07.2018
Absented himself without leave (without pay): 24.11.2016 to 11.07.2018

Total years of service = 09.06.2018 - 23.11.2016 = 19 years minus the continuous absent period. Is it correct to pay gratuity for 19 years?

Sir, your immediate advice is very helpful.

I think an absence of more than a year without pay may be considered as a service break, and the period will count afresh from his rejoining the job. However, it depends on the circumstances of the leave and how it was sanctioned.

Dear Srivastava,

Clarity is needed on how his leave was accounted for over one year and an odd period. What has the management done for his case, as he was not paid any remuneration/salary for such a period? His gratuity should be paid for the total period if he was considered to be on paid leave. However, you should have considered his case as a new joiner after that long leave and settled his amount then.

Dear colleague,

During the total service period of 21 years and one month, the concerned employee was unavailable for work due to absence for a consecutive period of one year and seven months. Therefore, your decision to consider him eligible for gratuity for 19 years is correct.

Regards,
Vinayak Nagarkar
HR Consultant

Continuity of Service Under the Payment of Gratuity Act, 1972

Continuity of service of an employee is calculated with reference to the provisions of Section 2A of the Payment of Gratuity Act, 1972. According to this section, an employee renders uninterrupted service even if their service is interrupted by sickness, accident, absence from duty with or without leave, lay-off, strike, or lock-out, or cessation of work not due to the fault of the employee.

However, if, in respect of unauthorized absence, an order has been passed by the management, in accordance with the Standing Orders, rules, or regulations governing the employee of the establishment, treating their absence as a break in service, then the period covered under such an order shall not be considered towards continuous service and thus shall be liable to be deducted from the total service period.

This means that even though your employee was on unauthorized leave and no salary was paid, their service would be counted towards continuous service unless you have passed an order whereby their unauthorized absence was treated as a break in service.

Regards

I think the contention of Jpratap Sir is quite reasonable. If management has not taken any action against the absentee in writing or passed any order, then the period of absence should be considered or counted as continuous service for the calculation of gratuity.

Absence and Break in Service

When an employee is absent for a longer period, say six months or one year, and no action is taken against him by the employer, then such absence will not constitute a break in service. However, if a specific order is issued stating that his period of absence will be treated as a break in service, then it will be construed as a break in service. In such a case, he should have worked for 240 days to become eligible for gratuity.