Gratuity Eligibility: Do Employees Need 5 Years of Service or a Minimum Each Year?

Dear Experts, I need clarification regarding gratuity payable to employees. If they complete 5 years of continuous service, are they eligible, or must they work a minimum in each completed year? Kindly advise.

Thanks

Five years of continuous service are necessary to be eligible for gratuity. However, if an employee has not completed 240 days of service in a year, then gratuity is not payable for that year. In other words, the employee must be on the company's payroll continuously for at least five years to be eligible for gratuity. Additionally, 240 days of service are required to receive gratuity for any particular year.

Hi, a continuous service period of 5 years makes you eligible for Gratuity.

In continuation of what KK has said, I would like to add that this 240-day period is inclusive of all paid holidays, leave days, and weekly off days. In the case of females, maternity leave, which is a paid leave, shall also be counted as service. Moreover, in some cases, even days of leave without pay will be counted as continuous service because only such unpaid days against which the employer has not initiated any disciplinary action shall be considered as 'approved leaves' which will qualify for gratuity.

The 'gratuity' contemplated under the Payment of Gratuity Act, 1972, is a one-time statutory payment by the employer of an establishment covered by the Act to his employees, irrespective of their status or position of employment, upon termination due to attaining the age of superannuation, retirement, resignation, or death during service, or disablement due to accident or disease. Even in the case of dismissal, it is treated as termination of employment for the purpose of gratuity if it is not due to certain specific types of proven misconduct.

However, this statutory gratuity has aspects of eligibility and entitlement on the part of the employee. Eligibility is grounded on the completion of a minimum continuous service of not less than five years in the same establishment. As per the judicial interpretation of the term "continuous service" as defined under Section 2-A of the Act, this continuous service shall be calculated backwards from the date of termination so as to notionally hold it to be 4 years and 240 days or 4 years and 190 days, depending on the type of establishment concerned. Once the exiting employee fulfills this condition, he is eligible to claim gratuity under the Act. This eligibility clause is not applicable in the case of death.

Entitlement to gratuity pertains to the completion of 240 days or 190 days of service in every year of service. In other words, he is entitled to gratuity only in respect of those years of his service in which he has worked for the minimum number of days mentioned above.

Hi all, In this connection, an employee completed 5 years of continuous service. However, in one of those years, he only worked 150 days. Is that employee eligible for gratuity or not? Please clarify.

Thanks

If during that one year in which he remained absent for such a long period, you had initiated any action against that employee, you can deny him gratuity. On the other hand, if you had not taken any action, then the absence would be construed as regularized, and the gratuity shall be paid.