Gratuity Dilemma: How to Calculate for an Employee with 15 Years of Service but Recent Absenteeism?

Dear Folks,

One of our staff has completed 15 years of service, but he has not been regular for the past year. His average number of present days during the 15th year of his service is 15 days. He has now resigned. When calculating his gratuity, how should we consider his last month's salary since he did not work for the entire month?

Regards

Five years continuous service

An employee, in order to be eligible to claim gratuity, should have worked with a particular employer for at least five years. Section 2A of the Gratuity Act states that 'continuous period' shall also include the following:

If an employee is not in continuous service of one year, he/she shall be deemed to be in continuous service of one year if he/she has, in the immediately preceding twelve calendar months, worked under the employer for not less than:
- 190 Days (in case of an employee employed in mines below ground)
- 190 Days (in case of an employee employed in an establishment which works for less than six days a week)
- 240 Days (in any other case)

If an employee is not in continuous service of six months, he/she shall be deemed to be in continuous service of six months if he/she has, in the immediately preceding six calendar months, worked under the employer for not less than:
- 95 Days (in case of an employee employed in mines below ground)
- 95 Days (in case of an employee employed in an establishment which works for less than six days a week)
- 120 Days (in any other case)

If an employee of a seasonal establishment is not in continuous service of twelve or six months, he/she shall be deemed to be in continuous service of twelve or six months if he/she actually worked for not less than seventy-five percent of the number of days on which the establishment was in operation during such period.

Definition of continuous service for gratuity purposes

Continuous service, for the purpose of gratuity, means uninterrupted service, which may be interrupted due to accident, sickness, absence from duty without leave, leave, lay-off, lock-out, strike, or cessation of work (not due to any fault of the employee) and are considered as continuous service.

Days included in calculating actual working days

The following days shall also be included while calculating the actual days an employee has worked:
- If an employee has been laid-off under an agreement
- If an employee has been on leave with full wages
- If an employee has been absent from duty due to temporary disablement caused by an accident arising out of and in the course of employment
- Maternity leave for a female employee, not more than twelve weeks

Dear Mohandas, I believe your concerns regarding the last drawn salary and the inclusion of the employee's last year's service for computing the gratuity of an employee who exhibited irregular attendance during the fifteenth year of service due to resignation stem from two main reasons: (a) his actual last drawn salary in the final month of service was less than a full month's salary due to his absence, and (b) his attendance was sporadic in the 15th year, averaging only 15 days per month.

I also assume that you have carefully reviewed the detailed response provided by our knowledgeable colleague V.M.L regarding the calculation of continuous service in accordance with section 2-A of the Payment of Gratuity Act, 1972.

Nonetheless, I would like to add the following points to facilitate a clearer understanding of the situation you have described:

(i) Upon reading the explanation to the proviso of subsection (2) of section 4 of the Act, it becomes evident that it is not the actual last drawn wages but the rate of last-drawn wages that must be considered for gratuity calculations.

(ii) Any unauthorized absence from duty without leave should have been treated as a break in service by the employer under the applicable standing orders or service regulations. Failure to do so would necessitate its inclusion for the purpose of continuous service as outlined in section 2-A.

Thank you.

The employee is eligible for gratuity as they have completed 5 years of service. When calculating, pay only for the period (year) of continuous service. The calculation should be based on the basic wages that remained on the last working day of the employee.