Is My Friend Entitled to Gratuity After 5 Years Despite Late Act Applicability? How to Counter Employer's Claim?

Dear Professionals,

One of my friends has been working for a small company for 5 years. His date of joining was 31/03/2018, and his last working month was April 2023. He is completing his 5-year tenure as per the gratuity act prescribed job duration threshold limit and is eligible for 5 years of gratuity as per the Gratuity Act. However, his employer is saying that when he joined in 2018, their employee count was less than 10, and therefore the Gratuity Act was not applicable to them at that time.

The act became applicable to them in 2020 when their employee count increased to more than 10 employees. Using this reason, his employer is refusing to pay him gratuity due to less than 5 years of service from the year the gratuity became applicable, which was in 2020. How can this reason be countered? Please advise.

Hi, Your friend is very much eligible for gratuity as he completed 5 years of continuous service with the company. Gratuity cannot be denied just on the grounds that the company didn't come under the purview of the Gratuity Act at the time of his joining (2018). Now that the employee is getting relieved by the year 2023, wherein the Gratuity Act is very much applicable, all employees who have completed a 5-year continuous service period should be paid gratuity at the time of relieving.

In case the employer refuses to pay even after the proper application, advise your friend to appeal before the Assistant Commissioner of Labour (of the respective office jurisdiction). Upon direction from the ACL, the employer doesn't have any option except to pay.

Eligibility for Gratuity

Five years of service is the basic eligibility for gratuity. Any employee who has completed this duration of service is entitled to the benefits of gratuity. The year in which the Gratuity Act was made applicable is not the determining factor.

Steps to Take

Ask your friend to apply and observe the response. There are government authorities who can enforce legal provisions.

Dear Friend,

I also share the same view as Mr. Lakshmi Narayan opined, that your friend is very much eligible for gratuity as he has completed 5 years of continuous service with the company.

It doesn't have any meaning on the part of the company that in 2018 the Gratuity Act was not applicable because the establishment had fewer manpower, but subsequently, the strength has increased and the act has become applicable. Therefore, the employees who are working there become eligible irrespective of their joining date.

You should advise your friend to make an application for the payment of gratuity in the prescribed form and send it to his employer via registered post. If the establishment does not pay, then make a case before the DM or in court to claim the gratuity.