Gratuity Eligibility: Can a Dismissed Employee for Absenteeism Still Claim It?

We have terminated one permanent employee for unauthorized absenteeism. Since it's a dismissal after conducting proper domestic enquiry proceedings, is that employee eligible for Gratuity.

Regards,
Mohan

If the employee has put in five years of continuous service, he is eligible for gratuity.

Gratuity can be forfeited only for dismissal from service that is due to moral turpitude or loss caused by the violent or riotous behavior of the employee. This provision is outlined in section 4(6)(b) of the Payment of Gratuity Act. Unauthorized absence will not qualify for the forfeiture of gratuity. Therefore, the individual should be paid gratuity if they had worked for five years or for a period like four years and 240 days, as interpreted by the courts of law.

It is true that the employee is eligible for gratuity if he has served 5 years of continuous service. In the case of habitual absenteeism, prior to dismissal, if the employee has served 5 years of continuous service but has not completed 240 days in all 5 years, is he eligible for gratuity for the years in which he was present for 240 days? Secondly, when calculating the 240 days, should we consider the days on which the employee received wages as stated in Sec. 25B of the ID Act?

Understanding 240 Days for Gratuity Eligibility

240 days means 240 PAID days. It is not 240 physically present days. The days on which an employee was on leave with pay, paid holidays, and paid weekly off days will be counted as days worked.

In any year, if the employee had fewer than 240 days and for that absence, action was initiated or the absence remains unapproved, that year will be considered as interrupted service. In such cases, no gratuity shall become payable. On the other hand, if no disciplinary action was taken for the absence and the leave of absence (LOP) was approved, then that year will be counted as uninterrupted service for deciding gratuity eligibility.

If an employee has completed five years of service, even if they are terminated except in cases involving fraud, the employee is eligible for gratuity.

To make it simple, gratuity is payable as per law if the employee has completed 5 years of continuous service with the organization. But there is also one thing to keep in mind that gratuity is a way of presenting gratitude towards the employee's service.

Also, it is important to keep in mind that after all the inquiries have been conducted regarding unauthorized absenteeism, one will have to pay gratuity if there was no major misconduct from the employee's side.

He is eligible to claim gratuity as he has not committed any action against under section 4(6)(b) of The Payment of Gratuity Act.

Regards,
KM

Depend on the length of service; if completion of 5 years, then payment is a must.

Sumit

Gratuity is applicable after completion of 5 years (or 4 years and 240 days, whichever is minimum) of service or in the case of demise.

Gratuity is applicable after the completion of 5 years. 5 years means the 5th year consists of 240 working/paid days. However, you can refer to various case laws for support.

Dear Mr. Mohan,

In the case of unauthorized absenteeism, you cannot forfeit the gratuity of the employee.

Gratuity is payable for the service an employee has put in. But in cases where an employee is dismissed, gratuity shall be forfeited.

If a 5-year service period is completed, then he is eligible for the payment of gratuity.

Sumit

Dear Priya,

Because of his unauthorized absence, if he falls short of completing 5 years of continuous service, which means during each year of his stint, he should have put in 240 days of uninterrupted continuous service as defined in the Act, then in principle, he is not eligible for gratuity. However, you need to share his attendance particulars during the entire period of 5 years' service or more if any, to advise you accurately.

Regards,
Vinayak Nagarkar
HR Consultant

Termination for absenteeism is not a ground for avoiding or forfeiting gratuity. Once an employee completes eligibility and does not fall under forfeiture clauses, they are entitled.

Hi,

Whether an employee is terminated or resigns does not matter. If the employee has completed 5 years (4 years and 240 days), he/she is eligible for Gratuity, except in cases where there are pending legal proceedings. The employer is obligated to pay gratuity.

Yes, the employee is eligible for Gratuity subject to conditions stipulated in the Payment of Gratuity Act, 1972. He/She must have completed 5 years of continuous service.

Also, for argument's sake, gratuity can only be wholly or partially forfeited when termination is effected for riotous or disorderly behavior or moral turpitude cases committed in the course of employment, which is not the case here.