Gratuity Calculation Confusion: Should 13 Years 5 Months 28 Days Be Counted as 13 or 14 Years?

Hi all, I need your advice on how the Completed Years of Service are calculated for Gratuity Calculation.

I have a case where an employee joined the company on 18 Jan 2008, and his last working date was 15 July 2021 (so his effective service period is 13 years 5 months 28 days). As per the usual calculation, the total completed years of service are showing 13 years (as the remaining period is less than six months). However, the employee is contesting that as per the gratuity act, it should be considered 14 years as he has met the criteria of working more than 120 days in the last '5 months 28 days' period.

Can someone please confirm if it should be 14 years? Is there any court ruling or any clarity on these types of cases?

Thanks!

The question raised by the employee is quite interesting. I have never faced such an issue in my career. Straight calculation indicates 13 years of completed service as well as 5 months and 28 days of service in the 14th year. As per normal gratuity calculation, it appears to pay 13 years of gratuity. But as per the definition of continuous service in the 14th year, the employee has worked for more than 120 days in the span of 5 months and 28 days.

Both seem logical. We usually do not calculate years of service the way the employee has calculated. Who knows what the interpretation of the appropriate authority will be. Requesting others to give their valuable views.

S K Bandyopadhyay (WB, Howrah) CEO-USD HR Solutions [Phone Number Removed For Privacy-Reasons] [Email Removed For Privacy Reasons] USD HR Solutions – To Strive towards excellence with effort and integrity

As pointed out by SK, it is a question that may involve different interpretations. I believe that since the employee has not worked for more than six months in the last year, the 14th year should be ignored. It is true that for deciding continuous service, each year of 12 months should have at least 240 paid days, and similarly, the same in 6 months should have 120 days. However, for calculating the amount of gratuity, what is required is the length of service. When the Act states that a service "in excess of six months" shall be rounded off to one year, it does not mean that 120 days within a period of six months shall account for one year.

Analysis of Gratuity Calculation Sections

The answer lies in an analysis of Section 2(A)(2) with Section 4(2) of the PGA 1972. The charging section states that gratuity at 15 days' wages is payable for every completed year of service or part thereof in excess of six months. So, it is quite unambiguous that it has to be in excess of six months.

Understanding Section 2(A)(2)(b)

Now, coming to Section 2(A)(2)(b), the deeming provision is that if the employee, during the period of six calendar months preceding the date with reference to which the calculation is to be made, has actually worked under the employer for not less than:

(i) ...

(ii) one hundred and twenty days, then it amounts to six months of continuous service.

So, at best, it is only six months of service, and hence it falls short of being in excess of six months of service.

Thank you for sharing your thoughts on the above query. The case is quite peculiar. As KK pointed out, the service period in the last 5 months and 28 days adds up to exactly 128 days. If we strictly adhere to the definition of the Gratuity Act (copied below), the phrase "part thereof in excess of six months" is validated in this scenario if we consider six months as per the definition of Section 2A (120 days).

"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."

I believe this situation may involve legal interpretation if a dispute arises. I would appreciate hearing your further views on this matter.