Gratuity eligibility - Completed 4 years and 183 days - I did my research and found mixed answers

Hi Members,

Is a person eligible for Gratuity after completing 4 years and 183 days of continuous service in one company? I did my research and found mixed answers. Some say eligible and some say not eligible. The company says not eligible. The company states that a person has to serve 4 years and 240 days to be eligible for gratuity. According to the Gratuity Act, is the person authorized for gratuity payment with 4 years and 183 days of continuous service? Please advise.

What you have mentioned in the 2nd paragraph of your post is correct. A person has to complete 4 years of continuous service, and in the 5th year, he has to complete 240 days of working (including weekly off, his paid leave period, company's paid holidays, etc.) to become eligible for gratuity payment.

Thank you for the response, P. Radhakrishnan Nair.

What happens to the gratuity amount which is part of my CTC at a private IT firm? When I was given the offer, the gratuity amount was shown as part of the CTC. Will I not receive it because I am not fulfilling my eligibility criteria, or is there a way to receive that amount since it was shown as part of my CTC?

Also, I came across this article - do you think it's true - https://www.zeebiz.com/personal-fina...-answer-119391

Please let me know.

Thanks and Regards,
John

Hi John,

As Mr. Rkn indicated, eligibility for gratuity payment arises only after an employee has completed 4 years and 240 days of 'continuous service' criteria. There is also a viewpoint suggesting that, for the purpose of calculating one year of service, 6 months can be rounded off to one year. However, this perspective has not been widely accepted or implemented. It is worth noting that 'CTC' and gratuity are considered part of the package but are not legally recognized as service conditions in our country. Therefore, completing 240 days of service in the 5th year is currently the valid requirement.

Your query regarding CTC has been a topic of discussion in other threads within this forum numerous times. To access these discussions, you can utilize the 'search topic/file' box above.

Thank you.

Thank you, Kumar.

A couple of days ago, there was news concerning labor reforms related to the Gratuity law. The reform states that the current 5 years will be reduced to a lower figure. If the reform comes into action, can employees go back to their past employers and claim gratuity if they meet the period criteria of the reform? Like in my case, will I be able to go back to my employer and ask for my gratuity once the gratuity reform is passed?

[URL] https://trak.in/tags/business/2020/08/12/employees-can-soon-get-gratuity-within-1-3-years-instead-of-5-years-as-part-of-labor-reforms/

Thank you,
John

Dear John,

Much remains as mere talks. Unless it takes the shape of a law or amendment to existing provisions, the present stipulation will only continue.

Any amendments, as we discussed, will only reveal the beneficiaries if and when introduced. At this point in time, we can't speculate on whether the amendments will be effective from a prospective date or a retrospective date. There are many ifs and buts. To be frank, if it's implemented with retrospective effect, you will be one of the luckiest persons on earth. The only option is to keep praying.

Thank you.

John,

I am also giving a link where you will find many discussions on the subject and opinions/views of our learned experts on this matter.

https://www.citehr.com/260004-gratui...ce-period.html

Thanks for your response, Kumar. Let's wait and hope it's applicable in the retrospective manner also. Cheers! Have a great weekend. Stay safe.

Regards,
John

As an addendum to my earlier post, I have gone through the link given by you. So far, the same has not been implemented. Let's hope for the best.

Dear P. Radhakrishnan,

Thank you. I hope it comes into effect soon and that it is also retrospective. :)

Regards,
John

Dear John,

It seems you are a student and you are conducting research on gratuity eligibility. I am very new to this forum, not even completing 100 days here. However, I wish to advise you not to draw any conclusions on any subject solely based on views expressed here. Do not rely on links or Google, or even media news. Instead, refer to the latest editions of Bare Acts, case laws, and other authentic materials. Form your own interpretation, engage with experts around you, and logically analyze the subject.

On the current topic, you should also read the draft code on the social security bill. If the Government is considering lowering the gratuity threshold, it should be reflected in the draft bill. There have been many suggestions like this over the years, but they have not been included in the draft bill. Yet, we continue to discuss them as if they are existing laws.

I am not implying that the lower threshold will never be implemented, but when it does, we can discuss it then. Even if it is introduced, it will not have a retrospective effect. Currently, the law states that one must complete 5 years of service to be eligible for gratuity. The exception is the High Court jurisdiction in Chennai and Kerala.

One may receive gratuity payment even without completing 4 years and 240 days. This should not be misunderstood as the law, though. No one will object to receiving gratuity early, but it does not change the legal requirements.

Kind regards,

[Your Name]

Dear Friends,

Further to my earlier post, I wish to make it clear that I do not disrespect the different view or interpretation. It has to be justifiable or have some authentic supporting.

I respect the views on gratuity eligibility based on judgments by the HC at the judicature of Chennai and Kerala, but that is not applicable outside its judicature. The law has also not been amended. Even in the draft code bill, this is not taken care of.

If the Madras HC judgment of 1998 is applicable all over India, then how was the gratuity claim of Sreeja upheld by the controlling authority subsequent to this judgment, and the appellate authority reversed the decision, accepting the employer's contention that gratuity entitlement would arise only on completion of five continuous years of service?

I am not denying that one can apply the analogy of these judgments while arguing the case for payment of gratuity for 4 years and 240 days.

For eligibility of payment of gratuity, completion of 4 years and 240 days is required instead of 4 years and 183 days. So, payment should not be done if eligibility is not completed.

Thanks & Regards, Sumit Kumar Saxena

Dear friends,

Eligibility for gratuity payment for those who have served less than 5 years of "continuous service" has been discussed repeatedly in this forum. Many establishments have accepted and paid gratuity based on the Madras High Court judgment, which concluded that 4 years and 240 days in the 5th year would meet the eligibility criteria. However, others have raised doubts about whether the Madras HC judgment automatically applies to other states, as there has been no clear amendment to the Act specifying a "5-year" requirement. This debate persists even though the Honorable Supreme Court has also confirmed that 4 years plus 240 days in the 5th year meets the eligibility criteria in the case of "LALAPPA LINGAPPA & ORS V. LAXMI VISHNU TEXTILE MILLS LTD., SHOLAPUR [1981] RD-SC 29 (11 February 1981)".

I believe it is appropriate to state that the contents of this judgment are applicable not only to the state of Maharashtra, where the cause of action originated, but to the entire nation as per the Constitution of India. In addition to this Supreme Court judgment, another SC judgment upholding the 4 years + 240 days norm for determining "continuous service" is also available, which I referenced in this column a few years ago and will repost shortly.

I may quote excerpts from the cited SC judgment as follows (it is lengthy to reproduce here but worth the space and time taken to remove lingering doubts):
"The significance of this legislation lies in the acceptance of the principle of gratuity as a compulsory, statutory retiral benefit. For a proper appreciation of the question involved, it is necessary to set out the relevant provisions of the Act. Sub-section (1) of s. 4 reads as follows: Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years, (a) on his superannuation, or (b) on his retirement or resignation, or (c) on his death or disablement due to accident or disease; Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement; Provided further that in the case of death of the employee, gratuity payable to him shall be paid to his nominee or, if no nomination has been made, to his heirs..."

References:
- https://www.citehr.com/473683-gratui...ml#post2098224
- https://www.citehr.com/440537-gratui...ml#post1993632
- https://www.citehr.com/337506-can-gr...ml#post2162288
- https://www.citehr.com/517210-gratui...ml#post2402006
- https://www.citehr.com/440537-gratui...-10-a-pg2.html
- https://www.citehr.com/440537-gratui...ml#post1993632

Thank you.

Dear Prof. Kumar,

This will probably be my last post on Gratuity. It is very incorrect to say that for the payment of gratuity, the Honorable SC also held that 4 years + 240 days in the 5th year for determining 'continuous service' meets the eligibility criteria in the case of "LALAPPA LINGAPPA & ORS V. LAXMI VISHNU TEXTILE MILLS LTD., SHOLAPUR [1981] RD-SC 29 (11 February 1981)".

This matter does not pertain to the Payment of Gratuity Act, which is an independent enactment under Social Security. How do the Madras HC (1998) and Kerala HC (2015) entertain the applications when there is an SC judgment (1981)?

If any employer is considering gratuity for 4 years and 240 days in the fifth year or even for lesser service than this, I have no objection. But that is not the law. The law is what is stated in the POG Act, which has not yet been amended based on the interpretation by the HC at the judicature in Chennai and Kerala.

I am sorry to have this kind of conversation with you. I even respect the judgments by the HC at the judicature in Chennai and Kerala, as I mentioned earlier.

With this, I conclude this topic for myself and for those whom I advise.

Dear friends,

I believe this thread is now filled with detailed interpretations from members, which, in my opinion, does not serve the intended purpose. The original poster did not receive a definitive reply. The poster is seeking clarification on the eligibility for gratuity payment after completing 4 years and 183 days of service. In one part of the post, the poster acknowledges that their company has mentioned ineligibility for gratuity payment due to not meeting the eligibility criteria.

A clear one-line answer was provided in response to their second query.

Dear friends,

The PG Act and the Rules made thereunder, when read together, should clear the air. Please read the highlighted portions of Rules-Form-U on pages 26 and 27 (attached in full). I don't think any more explanatory notes would be needed.

Dear friend,

After 4 years and 183 days of service, it is clear that you are not eligible. This conclusion has been supported by many of our members, leaving no room for ambiguity. What still remains is your current standing at 4 years and 240 days.

Thank you.

Hi Mercury2007,

From the discussion, what I understand is that you had been working in an IT firm. If the firm had a working duration of less than 6 days in a week, like, for example, having Saturday and Sunday off, this could put the eligibility period at 4 years and 190 calendar days. If not, it should be as per the usual duration of 4 years and 240 days.

In either case, I believe it is clear that you would not be eligible for the gratuity payment. As for the gratuity provision that had been part of the CTC stack, I do not see any way to get this paid out to you.

Dear Prof. Kumar,

Thanks for quoting the Lalappa Lingappa case. I mistakenly taken it as Surendra Kumar Varma case and said that this matter is not pertaining to Payment of Gratuity Act. I am sorry for that.

But, the Lalappa Lingappa case reminded me that the definition of ‘continuous service’ was introduced by insertion of an independent section 2A by way of amendment in 1984 effective from 1981 which was following this case of Lallappa Ligganppa only.

I remember this and therefore made further study when came across one thread on this forum only in which Adv. Keshav Kogaonkar from Mumbai interacted on same subject and his interaction was appreciated by our senior member none other than Umakanthan Sir and KK!HR who is one of the most appreciated members & Super Moderator at this forum.

The said thread is given in the link below:

https://www.citehr.com/591113-what-m...tuity-act.html

According to me the concept of Gratuity for long service has not been given complete go-bye, but provision has been made to pay the gratuity to those who are in service for five years and more.

I would like like to draw your attention to the judgement of H'ble SC in Straw Board Mfg. Co. 1977 II (LLJ 463).

It was observed by H’ble SC in this case that the sense of national consciousness is reflected in Gratuity Act which fixes the period of 5 years as the qualifying year for earning gratuity.

The concept of gratuity was initially to be gratuitous payment for long and meritorious service rendered by the employee in an organisation. The qualifying length was reduced to 5 years and the law was enacted in 1972.

In fact I had decided not to contribute any more on this subject. But since I made a mistake in reading Lalappa Lingappa case as Surendra Kumar Varma case, I thought of posting it.

Many learned professionals though they do not contribute here on CiteHR but read it, which I know. To them message should not go wrong. This is the purpose of this post.

Hi Mercury and other friends,

Pardon me for missing one more point here-

Section 4(2) of the PG Act says:

"... that for every completed year of service in excess of six months, the employer shall pay gratuity to an employee. That means if an employee works in the establishment for more than 6 months in a year, he shall be eligible to get gratuity at the prescribed rate."

The extract of this section is reproduced here:

xxxx

4. Payment of gratuity.

4. Payment of gratuity.- (1) Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years,--

(a) on his superannuation, or

(b) on his retirement or resignation, or

(c) on his death or disablement due to an accident or disease:

Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement:

4*[Provided further that in the case of death of the employee, gratuity payable to him shall be paid to his nominee or, if no nomination has been made, to his heirs, and where any such nominees or heirs are minors, the share of such minors shall be deposited with the controlling authority who shall invest the same for the benefit of such minors in such a bank or other financial institution, as may be prescribed, until such minors attain majority.]

Explanation: For the purposes of this section, disablement means such disablement as incapacitates an employee from the work which he was capable of performing before the accident or disease resulting in such disablement.

(2) For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days' wages based on the rate of wages last drawn by the employee concerned: Provided that in the case of a piece-rated employee, daily wages shall be computed on the average of the total wages received by him for a period of three months immediately preceding the termination of his employment, and, for this purpose, the wages paid for any overtime work shall not be taken into account:

Provided further that in the case of 1*["an employee who is employed in a seasonal establishment and who is not so employed throughout the year"], the employer shall pay the gratuity at the rate of seven days' wages for each season.

xxxxxxxx

I hope you would have completed 6 months of service; can you please check on this aspect and find out whether you got it right?

Also, read more when discussed on rounding of 6 months of service to one year earlier also in this link:

https://www.citehr.com/462940-paymen...-7-months.html

Dear All,
I have gone through the views of everyone on the issue and have also gone through the judgment of Madras H.C. With due respect to the judgment of Madras and Kerala High Courts, it is submitted that if 240 days is the day’s work to be put in over a period of 12 months in order to make the service continuous and uninterrupted, then there is no logic to have the qualifying period of 5 years for entitlement of gratuity and further why only in the 5th year it should be 240 days and not in all the years from 1st year to 5th year. If that is the ratio then every employee who completes 240 days in each of the year on wards i.e. from 1st year to 5th year should be entitled to gratuity. This according to me could never have been the intention of the legislature because if that had been the intention, there was no need to have the sentence “he has rendered continuous service for not less than five years” in Section 4(1) of the Act.
I had written an article on the issue which was published in 2019 (160) FLR Journal Section Page 90 on wards. For ready reference, the same is attached herewith.
Thanks
S.SENSHARMA

Thank you, Mr. Sensharma, for your inputs. Good work, keep it up.

However, I am constrained to say that I/we have no locus standi to interpret the law or debate the intentions or lack of intentions of the legislature as it is unlikely to provide any help or solutions to the seekers.

I believe this platform serves the purpose of sharing available information through search and source to help the needy. In the process, we come to know many things of jurisprudence, limited to sharing our suggestions and ideas. I am of the opinion that I/we cannot sit in judgment or give directions without risk and cost. Therefore, I feel that I/we shall have no role in decision-making on any matter, as I/we should not mislead anyone, even by mistake, with my/our purported notions or give false hopes or deny help when it is sought. With this in mind, I restrict myself to sharing the documents and information I could reach and refrain from responding to anyone's opinions expressed here, whether they align with my thinking or not. I would prefer to leave them for the readers to assess. Members may agree or may not.