Gratuity Confusion: Does Employee Count at Joining Affect Eligibility?

Respected & Dear All,

One of our employees has completed 5 years of service and left recently. We have prepared his gratuity sheet and submitted it to the accounts department.

Our accounts manager has a query: at the time of the said employee's joining, the staff strength was not at the full capacity of 10 people. Therefore, there is a question on how gratuity is applicable to him.

Currently, we have more than 150 employees. Please provide guidance on the above scenario.

Statutory gratuity is a one-time cumulative benefit payable upon the termination of employment based on the length of service computed backward from the very date of termination. Once the Payment of Gratuity Act, 1972 becomes applicable to any establishment under section 1(3)(b) or (c) by virtue of the number of employees on a particular date, the Act would be applicable to all employees with retrospective effect, notwithstanding the fact that the number of employees remains less than the threshold either in the past or in the future. This is the essence of the enabling provision given under section 1(3-A). What is important is that the termination of employment of any employee should take place on the very date or after the Act becomes applicable to the establishment.