Gratuity Dilemma: Should We Pay for Years of No Work Despite Employee Presence?

Background of the Case

One of our workmen joined our company in 1980 and retired in 2018. He did not work during the period from 2015 to 2018, although he reported for duty. He was simply sitting and going back, ignoring the instructions of his superiors to work. This was recorded in the logbooks of the respective section.

He was not paid any wages for that period based on the principle of "No Work, No Pay." He approached the court, which ruled in favor of the company by upholding the action of not paying wages on this principle.

Queries for Consideration

1. Whether to pay gratuity for the period from 2015 to 2018 during which he did not work, though he reported for duty and was not paid any wages.
2. Whether that period is considered continuous service under Section 2A of the Payment of Gratuity Act 1972.

I request my colleagues to advise on the above queries.

The whole matter can be resolved by careful reading of Sec 2A and 4 of the Payment of Gratuity Act 1972.

Here, with the brief facts mentioned in the query, the individual is entitled to gratuity even for the period of no pay, no work.

When the employee was reporting for work but did no work, a show-cause notice should have been given, and disciplinary action taken.

It is my opinion that he is entitled to gratuity for the period of no work, as stated by the company.

The company should have gone on record to convey to the worker, after the court order upholding his absence on a no-work, no-pay basis, that his service for that period is treated as a break in service and will not be counted as continuous service for the purpose of gratuity. It would have strengthened the stance of treating that period as a break in service and making it a disqualification for receiving gratuity for that period. In the absence of such a record, it is disputable to treat that period as a disqualification to receive gratuity.

Regards, Vinayak Nagarkar HR Consultant

I am just wondering under what circumstances a workman could be on the rolls of the company during the period 2015-18, even though he was reporting for duty but was simply sitting idle and then going back. What was recorded in the attendance register so far? How was his presence accounted for in all returns and registers under various Acts/Rules?

Dear colleague,

As per the information provided by you, the workman is not entitled to gratuity under the condition of a service break. However, he is eligible as your establishment did not terminate him on the grounds of long absence and allowed him to retire upon attaining the required age.

Overall, he is not eligible due to a three-year break in service as he has not maintained regular attendance. The workman can be denied gratuity based on this break in service. The individual may choose to seek legal recourse in this matter.

Please let me know if you need further assistance or clarification.

Thank you.

Dear Mr. Kumar, I fully agree with the views of Mr. Nathrao. The gratuity to an employee is based on the 'continuous service' rendered by him. This continuity of service is calculated in accordance with the provisions of Section 2A of the Payment of Gratuity Act, 1972. According to this section, an employee renders uninterrupted service even if his 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 an order has been passed by the management in accordance with the Standing Orders, rules, or regulations governing the employee of the establishment, treating his absence as a break in service, then the period covered under such an order shall not be countable towards his continuous service. Thus, such a period shall be liable to be deducted from his total service period.

As per the facts stated by you in the opening paragraph of your query, he was liable to disciplinary action for not carrying out the work as per the directions of his superiors. Even an order of 'No Work No Wages' was passed against him by the court. However, the management failed to issue an order in writing regarding his break in service. Therefore, his service would be countable, and his gratuity would be payable to him till 2018 as per the provisions laid down in section 2A of the Payment of Gratuity Act, 1972.

Best wishes and regards.

Hi, I am working for a Gurgaon-based company for the last 12 years. They have not registered under the Gratuity Act, even though there are 500 employees working in the organization. Now, the company is taking an undertaking letter, stating not to claim gratuity in the future. They have insisted that I sign the letter. Finally, I have signed a copy and submitted it. In the future, if I file a case, can I receive the overall year's gratuity amount? I have attached the letter.

Hi, this is not legally correct.

Gratuity Eligibility Under the Gratuity Act 1972

According to the Gratuity Act 1972, an employee is eligible to receive a gratuity amount after completing five years of continuous service at one organization. The gratuity amount is paid to the employees once they retire, resign, or are laid off, and the employer cannot claim that it was already paid on a monthly basis. Even if a letter of undertaking is forcibly collected from the employee, it will not be valid. Also, gratuity should be calculated from the effective date of joining.

This letter will not be valid even if it is signed by the employee.