Is an Employee with 4 Years and 9 Months of Service Eligible for Gratuity? Seeking Advice

Dear Seniors and Colleagues, one of the employees is expected to be relieved from services on 01.09.2021. He has completed 4 years, 9 months, 2 weeks, and 4 days of service up to the relieving date in the organization. Is he eligible to receive gratuity? Please advise.

The section states that for every completed year of service in excess of six months, the employer shall pay gratuity to an employee. If an employee completes 4 years and 6 months of continuous service in the same establishment, they are eligible to receive gratuity as per the Payment of Gratuity Act 1972.

Dear Malay Gauri Consultants Private Limited,

Let me clarify that the section related to "rounding off" of completed years is applicable after an employee has completed 5 years of continuous, uninterrupted service.

Based on some court verdicts, an employee may be eligible for gratuity after completing 4 years and 240 days. However, your statement "completes 4 years and 6 months of continuous service" is not the right approach to define the criteria.

Moreover, as per the Payment of Gratuity Act, 1972, the criteria of 4 years and 240 (or as applicable) days is still not regularized by any notification. I have seen many employers reject gratuity if an employee has not completed 5 years of continuous (uninterrupted) service. However, in such cases, the employee can claim gratuity by presenting their case to the Labour Office (or court) and referencing court verdicts.

Senior members can provide more input on the matter.

Interpretation of Continuous Service for Gratuity Eligibility

The views of learned members that the interpretation of 4 years and 240 days as equal to 5 years of continuous service are endorsed by only a few High Courts. There is no change in law or any Supreme Court judgment rendering its applicability throughout the country. The Golden Rule of interpretation is the plain and ordinary meaning of the statutory term, which mandates that there has to be at least 5 years of continuous service to be eligible for the payment of gratuity. The purposive interpretation given in a few judgments is only helping the claim with 4 years and 240 days of service.

Counting Service for Gratuity Eligibility

As regards counting more than 4 years and six months of service as being eligible, it is not accepted in any judgment of High Courts or the Supreme Court. Section 4(2) mentions only that service in excess of six months is eligible for gratuity for that year. So it is only for computation purposes and hence it cannot be stretched to be a part of the definition of 'Continuous Service'.

Dear KKHR, your explanations have been very useful to us. We understand that for the purpose of ascertaining the eligibility of a staff member for the payment of gratuity, 5 years of continuous service is essential, and any partial service (be it 6 months or more) should not be considered as one year. Am I correct in my understanding, sir?

You are correct in stating that 4 years and six months of service won't qualify for gratuity as per the Payment of Gratuity Act, 1972. Also, please note that the Madras High Court has held that 4 years and 240 days would entitle the employee to gratuity. Ref. 1998 LLR 1072 MADRAS HIGH COURT, Honorable Mr. S.M. Abdul Wahab J. in W.P. No. 21350 of 1987, decided on 12.6.1996 (Mettur Beardse Ltd. (represented by Its Personnel Manager), Madras vs. Regional Labour Commissioner (Central) & Authority under Payment of Gratuity Act, Madras & Others). Since your tagline indicates a Chennai location, this judgment is directly applicable.

Thank you for the clarification duly citing the court ruling for the context. Kindly also clarify whether the 240 days are calendar days or clear working days.

It is clarified that 240 days refer to 240 calendar days of continuous service, which includes weekly offs, holidays, and leave availed. Please let me know if you need any further assistance.