Is This Employee Entitled to Gratuity After Switching from Fixed-Term to Permanent?

Employee Entitlements After Fixed-Term and Permanent Employment

An employee works on a fixed-term contract of 2 years and is automatically terminated at the end of the contract. He joins afresh after 8 months as a permanent employee and has worked for 4 years. Is he entitled to gratuity? What are the other things he may be entitled to?

The employee in question may be entitled to gratuity based on the total number of years he has worked, including both the fixed-term contract period and the subsequent permanent employment period. In many jurisdictions, gratuity is calculated based on the total duration of employment.

Other Potential Benefits

Apart from gratuity, the employee may also be entitled to other benefits such as provident fund contributions, health insurance coverage, paid time off (such as annual leave and sick leave), and any other benefits stipulated in the company's policies or applicable labor laws.

It is important for the employer to review the specific terms of employment, relevant labor laws, and company policies to determine the entitlements of the employee in this scenario accurately. Consulting with HR professionals or legal experts can provide further clarity on the employee's entitlements in such situations.

Eligibility for Gratuity and Other Benefits

The employee's tenure starting after the lapse of 8 months as a regular employee is a separate and fresh innings of service under the same employer. Therefore, if his service gets terminated just after 4 years, that is before completing 240 days of service in the fourth year either on his own or otherwise, he is not eligible for statutory gratuity. The other terminal benefit in case of such an exit on his own would be only the encashment of EL, if any, at his credit.

I may add, you have not mentioned whether he is terminated from service, resigned, or still in service. For what purpose do you require the clarifications with respect to his entitlements?

The break of 8 months between the FTC and the permanent employment does not constitute 'continuous service' for combining 2 + 4 years of 'continuous service' to be eligible for gratuity, which requires a minimum of 5 years of continuous service. Additionally, if he is being separated, and if you wish to disregard the 8-month break and combine 2 + 4 years for paying some ex-gratia (under any name you choose), as a reward, I will have no objection. It's at your discretion.

Resignation and Full and Final Settlement (FnF)

He has resigned from duty. The company is asking me to create the Full and Final Settlement (FnF). I was wondering, if he was terminated, does that change anything?

Documents Required for Full and Final Settlement

Can you also help me with what documents are required for FnF? Is the FnF and a resignation letter sufficient, or do I need to add any other documents?

Entitlements and Considerations for Termination

If that's his service status, then Mr. Umakanthan has already clarified regarding entitlement, and no gratuity is accrued. Is any notice or notice pay involved?

If termination occurs, you should consider payment of termination compensation at 15 days' salary for every completed year of service to be fair enough (even if he is not covered under the ID Act). If possible, gratuity as well.

Plus, consider leave encashment, unpaid salary/bonus, or ex-gratia, if any, in any case.

EPF & EPS Settlement

EPF & EPS settlement (if no transfer via Form 11 is involved). How old is he? Has he crossed 58 years?

Recovery of Advances and Assets

Is there any recovery for company advances like vehicle loan, house building loan, etc.? Check that.

Retrieve company's assets like laptop, mobile phone, vehicle, documents, data storage devices, books/files, documents, company quarters, and furniture.

Additional Checks and Documentation

Check for any bank loan endorsed by the company (as surety/2nd/co-obligant) and any departmental inquiry pending.

Obtain a no-due certificate from all departments.

Prepare an experience and relieving letter, a detailed report of handing over and taking over charge (jointly to be signed by a person coming into his shoes), and a checklist of assignments completed, in the pipeline, to be pursued mentioning the status and contact persons.

It is better to prepare a complete checklist before processing and submission.