Is My Friend Eligible for Gratuity If He Leaves His Job Just Before 5 Years?

One of my friends is working in an organization for over 4 years, and he will complete his 5 years in April 2019. He is planning to leave the job before April 2019. Is he eligible for gratuity? If yes, can anyone suggest his gratuity amount.

Dear Gyandeep,

One needs to serve a minimum of 5 years continuously in order to be eligible for gratuity.

Regards,
Rahul

If I am not wrong, if the employee puts 4 years and 10 months, he/she is eligible for gratuity.

Raghuram

Dear Gyandeep,

The Gratuity Act prescribes the payment of gratuity upon completion of 5 years of continuous service. Based on the judgment of the Madras High Court, some companies have adopted the practice of giving gratuity benefits even upon completion of 4.6 years. Please check this practice with the said company.

Shailesh Parikh
99 98 97 10 65
Vadodara

Eligibility for Gratuity Under the Payment of Gratuity Act

Section 4 of the Payment of Gratuity Act mandates the completion of 5 years of service to be eligible for gratuity. In the Mettur Beardsell case, gratuity was awarded after the completion of 4 years and 240 days by the Madras High Court. So, this may apply to the state of TN; however, a similar appeal was later quashed by the Lucknow court, stating that the act mandates the completion of 5 years of continuous service.

Unless you are in the state of TN or your company policy/appointment letter states the completion of 4 years and 240 days for gratuity eligibility, you are not eligible for gratuity before the completion of 5 continuous years of service.

Regards,
Rahul

Hi, If your friend is very particular about getting the gratuity amount, ask him/her to complete the 5-year tenure in the company to rule out any issue of not being paid the said amount. Anything less than that might lead to issues wherein, depending on the relationship and the company policies, the employee may or may not get it. Going legal may not be a good option unless one is ready to spend time and pursue the issue.

Thanks and Regards

Please go through the Payment of Gratuity Act, specifically Section 4, which is as follows (though not in full):

Payment of Gratuity

(1) Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years, -

(a) on his superannuation, or
(b) on his retirement or resignation,
(c) on his death or disablement due to accident or disease:

Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement.

As long as the above is fulfilled, there should not be any issues, although an employee leaving in the fifth year after working for more than 8 months has been a subject of debate, with some considering 240 working days as the criterion.

I hope this answers the person who questioned my earlier response.

Thanks and Regards

I have completed 3 years in the same company, and my gratuity is deducted from my monthly salary. However, after 3 years, the employer refuses to continue the job. Can we claim the gratuity?

In India, according to the Payment of Gratuity Act, an employee is eligible for gratuity only if they have completed a minimum of 5 years of continuous service with the same employer. If your friend leaves the job before completing 5 years, he would not be eligible for gratuity as per the Act. Regarding the deduction of gratuity from your monthly salary, it is important to note that gratuity is usually paid by the employer as a lump sum amount upon meeting the eligibility criteria. If the employer refuses to continue employment after 3 years, you may be entitled to claim the gratuity amount accumulated till that point as per the company's policy and the legal provisions of the Gratuity Act. It is advisable to consult with a legal expert or the labor department to understand your rights and the exact procedure for claiming gratuity in this scenario.

Eligibility for Gratuity
As per the Payment of Gratuity Act, 1972, an employee is eligible for gratuity if they have completed at least 5 years of continuous service with the same employer.

In your friend's case, since he will complete 5 years of service in April 2019 and plans to leave the job before April 2019, he will not be eligible for gratuity as he will not have completed the required 5 years of continuous service.

Gratuity Calculation
If your friend were to complete 5 years of service and leave the job after April 2019, the gratuity amount would be calculated based on his last drawn salary and the number of years of service.

The formula for calculating gratuity is:

Gratuity = (Last drawn basic salary + Dearness Allowance) x Number of years of service x 15/26

However, since your friend plans to leave before completing 5 years of service, he will not be eligible for gratuity [1].

Eligibility for Gratuity Under the Payment of Gratuity Act, 1972

As per Sec. 4 of the Payment of Gratuity Act, 1972, gratuity is payable to an employee upon the termination of employment after rendering continuous service of not less than five years, either on superannuation, retirement, death, or disablement due to accident or disease. However, completion of five years is not mandatory in the case of termination of employment due to death or disablement.

Definition of Continuous Service

Continuous service is defined under Sec 2A of the Act, which states that gratuity shall be paid if an employee works for 190 days in the case of a mine (below ground) or 240 days in other cases.

Case Law: Mettur Beardsell Ltd Vs. The Regional Labour Commissioner

In the case of Mettur Beardsell Ltd Vs. The Regional Labour Commissioner (1998 LLR 1072), the Madras High Court clearly held that gratuity is payable if an employee works for 4 years and 240 days or 190 days, as applicable, in the fifth year and does not necessarily have to complete five years in full term. There are a few other case laws as well. However, there is no Supreme Court verdict on this.

Steps to Take if Gratuity Claim is Rejected

If the management rejects your gratuity claim, you may approach the Authority under the Act and file a claim petition for payment of gratuity. It will be allowed, and you can claim without any issue.

yes if he completed 240 days in 5th year