Can Adjusting PL Leave Affect Gratuity Eligibility for 7 Years? Seeking Advice on Employee Query

Query Regarding Gratuity Adjustment

Kindly clarify my query regarding gratuity. An employee has completed 6 years and 5 months in service and has resigned. His last working day is 15 days from now.

Now, he has PL leaves as per the Maharashtra S&E Act accumulated to the tune of 45 days.

The employee is now quoting Sec 4(2) of the Gratuity Act 1972 and asking to adjust his 45 days, post which he will be eligible for gratuity payment for 7 years instead of 6 years.

Can PL Adjustment Affect Gratuity Eligibility?

My query is, can PL adjustment be done in such a way that he can seek gratuity payment for 7 years? If we adjust PL and his notice period, he would have completed 6 years and 7 months. Please advise.

Gratuity Eligibility at Termination

Gratuity is payable at the cessation of employment. If the termination or resignation is effective after 6 years and 6 months, then the employee would be entitled to gratuity for 7 years; otherwise, not.

-S.K. Mittal
Industrial & Labour Lawyer
[Phone Number Removed For Privacy-Reasons]

Gratuity Calculation and Continuous Service

Go by the saying 'You cannot have your cake and eat it too'. The employee has worked for only 6 years and 5.5 months, which clearly entitles him to only 6 years of continuous service. There is no provision in the Payment of Gratuity Act 1972 for deeming the leave payment period as reckonable service for the calculation of Gratuity. In fact, the provision in Section 2A of the Act defining Continuous Service is 'actually worked', so there is no scope for any deeming provision.

Leave Encashment and Service Period

The leave encashment cannot qualify as a service period. If he has 45 days of PL pending, he can encash it and get relieved. Otherwise, he can avail of that 45 days leave, join back once the leave is over, and then get relieved.

Management Prerogative on Leave

Whether to grant leave to an employee, especially one who has resigned, is purely a management prerogative. You can refuse leave but allow encashment. If so, he will be eligible for 6 years' gratuity only.