Gratuity Concerns: Does a Suspension Affect Continuous Service and Gratuity Calculation?

After completing 9 years and 5 months in an organization, one of my friends was suspended for some charges for 3 days with LWP. After that, he is still continuing in the same organization. So, will it affect his gratuity in any way? Will gratuity be calculated in two parts or continuously, and will it be counted as a break in the service?

This three-day leave without pay (LWP) will not affect the calculation of 240 working days in a year. Therefore, nine years and five months will be treated as nine years.

Thank you for your attention to this matter.

Means he is still continuing after a 3-day suspension, so will the suspension be counted as a break in the service? What about gratuity - will he get it? If yes, then will the period after the suspension be counted as fresh or in continuation of 9 years and 5 months?

Understanding Suspension and Its Impact on Employment

Suspension is the temporary debarment of an employee from work without affecting their contract of employment with the employer. Therefore, the employee continues to be in the service of the employer during suspension, irrespective of its type and duration.

Types of Suspension

Suspension is of two types: suspension pending enquiry and punitive suspension.

In the case of suspension pending enquiry, after any punishment is finally awarded in the disciplinary proceedings, the period of suspension would be regularized as duty, or a portion of the suspension already undergone can be ordered as punishment. This is subject to the restriction on its length as mentioned in the service regulations or standing orders, as the case may be.

Only punitive suspension would be treated as a break in service, which is a disqualification for the purpose of calculating continuous service for gratuity.

Impact on Gratuity and Service Calculation

It's important to note that only this unqualified period of service will not be taken into account for the calculation of total service, comprising the period before and after such punitive suspension. This is referred to as "dies non" in service terms. A dies non will not be an effective break in service so as to affect the continuity of employment just before and after such a break but will not be taken into account only for terminal benefits like gratuity, pension, etc.

Therefore, in the case of termination of your employment in the future, only these three months would be excluded from your entire service for the purpose of calculating gratuity under the PGA, 1972.

The fact that it was treated as 'LWP' itself will suggest it has been treated as 'leave' and having taken back it should not infringe gratuity entitlement.

I am sure what was the process of enquiry, if any conducted. If yes, the final verdict of the Enquiry Officer has to be looked into. If there is a mention about 'break in service' and he won't earn gratuity for this suspended period then it's a different issue. If there is no mention, no worry.

Dear colleague,

In the instant case, the suspension without wages for 3 days was a punitive action and is regarded as a temporary break in service. However, since his employment contract continues thereafter, he will not be disqualified for gratuity on this ground alone if he has otherwise completed 240 days of continuous service in that year. Service will not be treated in parts for the purpose of gratuity but as continuous.

Regards,
Vinayak Nagarkar
HR and Employee Relations Consultant

In your post, you mentioned that after the suspension of services was lifted, your friend has returned to service in the company, and he is continuing services. So, he is eligible for gratuity payment as per the Payment of Gratuity Act, 1972, and the 3 days of the suspension period will not be counted as a break-in-services.

In continuation of the previous query, I want to confirm that if he is continuing after suspension, then he has to qualify again for the 5 years eligibility criteria for gratuity separately for this period. Will it be a continuation of the previous time period before suspension, or will gratuity be calculated for the total period with the 3 days not counted? Can any organization deny gratuity on suspension grounds even if it is only for 3 days?

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

My opinion is no. With suspension imposed, no separation takes place; there appears to be no "break-in-service" intended, and therefore, for gratuity, the service continues without a break. No need to rework eligibility criteria.