Is My Friend Eligible for Gratuity After 4 Years and 240 Days of Work? Seeking Advice!

My friend completed 4 years and 240 days. Is he eligible for gratuity? There is no part of gratuity in CTC. Even after this, can he claim gratuity? Please advise. Thanks.

As per the Payment of Gratuity Act, 1972, any employee becomes eligible for gratuity when they have completed five years of service. An employee who has worked for 240 days in a year is considered to have completed a full year. Therefore, since the employee in question has completed four years and 240 days, they will be eligible for gratuity. This eligibility arises after the completion of five years, whether the employee works for the remaining period beyond 240 days or not.

G K Sharma

The date of completion of 5 years will be taken from the date of joining to the date of leaving service. The issue of 240 days comes only to decide continuous service. Therefore, if one works for 4 years and 240 days, it is not necessary that he is eligible for gratuity, but on the date of leaving, he should have 5 years of total service.

Regards,
Madhu.T.K

Dear [Recipient],

Your friend is eligible for gratuity. As per the Income Tax Act of 1961, if his company is covered under the Payment of Gratuity Act, then the Days/Month Fraction is added as the next year. However, please seek legal advice as well.

Regards,
N. Khopade

He will be entitled to gratuity for 5 years. This is because he has worked for 240 days, which is above 6 months. If the fractional months are 6 or above, then the fraction is added to consider one complete year.

Hi,

What is a year of service under the Gratuity Act?

A year of service means, for the purpose of calculating gratuity, the individual should have worked for 240 days in that calendar year. For instance, an employee had worked for more than 7 years, and the number of days worked in each year are as follows:

Assuming that the total number of days per year is 303 days:

1st year: 300 days
2nd year: 255 days
3rd year: 298 days
4th year: 129 days
5th year: 310 days
6th year: 110 days
7th year: 303 days

Currently, the employee is eligible for five years since he has not completed 240 days, which is the eligible criteria for two years. However, it is noted that 99.99% of the companies do not follow this practice.

The application of the Act is extended to those who have completed 4 years and 240 days in the fifth year. For calculation purposes, the gratuity is calculated in multiples of 6 months. For example, if an employee completes 6.7 years, the gratuity is to be calculated for 7 years.

I hope this clarifies your query.

Regards,
Michael Nicholas

As pointed out by me in my earlier posting, the date on which one completes 5 years of service with reference to his joining is the date on which he becomes eligible for gratuity. One who joined on 1-1-2003 becomes eligible to get gratuity on 1-1-2008. If he leaves during 2007 but works for 240 days in 2007, he cannot get gratuity as per the Payment of Gratuity Act. In P. Raghavalu and Sons vs. Additional Labour Court, Andhra Pradesh, it was decided that one who had worked for 4 years, 11 months, and 10 days (just 20 days short) was not eligible for gratuity. They stated that the qualifying phrase "fraction of the period exceeding six months shall be taken as one year" would be considered for deciding the amount of gratuity and not for determining the eligibility for gratuity.

I heard that there is some other judgment against this ruling permitting those with 4 years + 6 months to get gratuity. However, the interpretation of the Act is to consider 5 years from the date of joining to the date of leaving.

The fraction of six months and 240 days is considered for determining the amount of gratuity. As such, one who has worked for 6 years and 7 months will get gratuity for 7 years.

Regards,

Madhu.T.K

Hi, I have a query related to the same subject. If the gratuity is included in the employee's CTC and the employee leaves the organization before completing 5 years, will he be eligible for the gratuity?

No, not at all. Showing the gratuity payable on discharge, leaving, or on superannuation in the monthly salary itself is a wrong practice followed by the new generation companies. Gratuity will not accrue right from the beginning. It is not payable during the service period, but only when an employee leaves after completing 5 years or dies while in service. The gratuity and reimbursements are shown as salary (CTC) just to lure employees. It is cheating. It is not paid every month but is payable only after 5 years, and that also only when the employee leaves. Therefore, even if the gratuity is shown as part of CTC, it will not be paid until the employee completes 5 years and leaves.

Regards

I also have the same issue. I have been working for an organization in India since 21st June 2004 and have to join the Head Office of the same organization abroad on 15th March 2009. Though it is the same organization and I am completing 4 years and 240 days of employment, shall I be eligible for gratuity from the office in India? Please reply soon.

Hi,

A friend of mine has received an Indian salary for 4 years and 8 months and a Singaporean salary for 3 years from the same company. Is he eligible for gratuity?

Hi,

A friend of mine has received an Indian salary for 4 years and 8 months and a Singapore salary for 3 years through the same company. Is he eligible for Gratuity?

Dear All,

I too have 2 queries related to Gratuity calculation.

1. One of my friends has worked in XXX organization for about 4 years, then joined another organization for 5 months, and later rejoined the same company after 5 months. Is he eligible for Gratuity since he has previously worked in the same company?

2. How is Gratuity calculated on a monthly basis? I am confused whether it is 4.83% or 4.81% or another calculation method.

Please, could some of you clarify this?

Apart from this, I have 1 more query about Union formation. Though this is a different topic, I would appreciate your suggestions. One of our factories is facing this issue. Currently, all the factory workers have formed a union and have issued a written demand notice to the management, giving a 1-week deadline. They stated that if their demands are not met, they will go on strike. The 1-week deadline is almost over. Can anyone explain the correct process to be followed in this situation? Specifically, do the workers need to file this with the acl office or can they proceed directly to strike? What is the actual procedure?

Please, someone help me as I am in total confusion. I am eagerly awaiting your valuable responses.

Thanks & Regards,
Vijaya

If a person, at the time of leaving the organization, has just completed 5 years and 6 months, will he be eligible for 6 years or 5 years of gratuity? For example, Arun joined XYZ company on 1st April 2004, and his last day in the organization is 30th September 2009. However, he has worked more than 120 days from March 2009 to September 2009.

Hi All,

I have a question. I want to know if a person dies and at the time of death he has completed 4 years and 240 days, will he be eligible for Gratuity?

Sonali N. Kapoor

Dear Vijaya,

Your friend will not be eligible for gratuity as there was a break in his period of service. Gratuity is not calculated on a monthly basis; we calculate it at the time of superannuation of any employee after the completion of 5 years. The formula is as follows:

Basic + DA (Generally an average of the last 10 months is taken) * 15 * number of years worked / 26

Sonali N. Kapoor

Hi Vijaya,

1. The workmen who form a Union need to get registered with the ACL Office.
2. When any demand is submitted to the Management, they must produce a copy of the Charter of demands to the ACL Office as well.
3. The Trade Union is required to submit a minimum 14 days' strike notice to the management, stating that if their demands are not settled within 14 days, they would go on strike.
4. The management should first have a discussion on the charter of demands raised by the trade union with its Union Leaders, come up with an amicable solution, draft a Bilateral agreement, and submit a copy to the ACL Office.
5. If the demands are not settled, the Union can seek ACL involvement for settlement. ACL would call the Union Leaders and the Management representatives for a discussion on the issues raised, potentially resulting in a TRIPARTITE AGREEMENT.
6. The Trade Union cannot go on strike without serving a 14-day notice to the management; otherwise, it would be an illegal strike.

It is always better to resolve issues bilaterally without the intervention of the ACL to enhance understanding and relations with the workmen.

Mohan Rao
Manager HR

Warm greetings to the HR fraternity.

Mr. Madhur is absolutely right.

The Gratuity Act itself explains that gratuity should be granted only after 5 years of service. The clause of 240 days is a way to overcome some issues in case of a fatal accident or death of an employee. Please avoid taking advantage of a subterfuge.

Thanks and regards,
"Vishal Saxena"

Dear Mr. Madhu,

Thank you for the post. It's a valid point regarding gratuity inclusion in CTC. It is a form of cheating that should be avoided. I am currently pursuing an MBA in HR as well as a Masters of Labor Law. Discussions like these are truly helpful for freshers. I believe the point made by Mike1957 is logically correct.

My wife worked in an MNC as a Tech Support Executive from February 2, 2004, until September 5, 2008, which totals to 4 years, 7 months, and 3 days. She worked five days a week with two days off per week. She did not take any unpaid leave; all her absences were either due to sickness or planned leave.

The total number of days between February 2, 2004, and September 5, 2008, is 1645 days. Considering two days off per week, the total off days during this period amount to 468 days. Therefore, the number of days she worked is 1177.

The question now arises: is she eligible for gratuity? Based on the calculation, she seems to be eligible.

If she is indeed eligible, how should we proceed with it? Your guidance on this matter would be greatly appreciated.

Hi, I worked with an MNC in Mumbai and following are my details. Please let me know if I am eligible for Gratuity. I suppose I am after reading through the Gratuity Act and the blog here.

Start Date End Date No of Days
18-Jul-05 17-Jul-06 364
18-Jul-06 17-Jul-07 364
18-Jul-07 17-Jul-08 365
18-Jul-08 17-Jul-09 364
18-Jul-09 03-Jun-10 320

Regards,
Pravin

Dear Friends,

Whether an employee has worked for 4 years and 220 days, are they eligible for gratuity? Are there any special cases applicable in such a scenario?

Regards,
RAMESH.A
HR-EXECUTIVE

Does this apply if the employee is on a third-party contract? Kindly elaborate.

Regards

Sir,

My friend has been working in a small-scale industry for the past 10 years. They are paid on a daily wages basis, and the wages are settled on a weekly basis. Now, he wants to leave the company. Is he eligible for gratuity? (i.e., are daily wage employees eligible for gratuity?)

Thanks

Dear Member,

If the Payment of Gratuity Act, 1972 is applicable to the establishment, then this daily wage employee is also eligible to receive gratuity payment from the employer.

Regards,
R.N. Khola

Dear Madhu Sir, I'm really not clear about the eligibility of Gratuity from your reply. In your earlier postings, you had mentioned a Madras High Court case wherein an employee rendering continuous service for a period of 240 days in a year will be deemed to have continued in service for one year. Quoting from the judgment - "Thus, an employee who has put in service for 10 months and 18 days for the fifth year subsequent to the first 4 years should be deemed to have completed continuous service of five years - His claim for gratuity is tenable." Does it not stand valid now? Please explain.

Thanks & Regards,
Jeene

"As pointed out by me in my earlier posting, the date on which one completes 5 years of service with reference to his joining is the date on which he becomes eligible for gratuity. One who joined on 1-1-2003 becomes eligible to get gratuity on 1-1-2008. If he leaves during 2007 but working for 240 days in 2007 cannot get gratuity as per the Payment of Gratuity Act. In P. Raghavalu and Sons Vs. Additional Labour Court, Andhra Pradesh, it was decided that one who had worked for 4 years, 11 months, and 10 days (just 20 days short) was not eligible for gratuity, saying that the qualifying phrase "fraction of period exceeding six months shall be taken as one year" will be considered for deciding the amount of gratuity and not for determining the eligibility for gratuity.

I heard that there is some other judgment against this ruling permitting those with 4 years + 6 months to get gratuity. But the interpretation of the Act is to take 5 years from the date of joining to the date of leaving. The fraction of six months and 240 days are considered for determining the amount of gratuity. As such, one who has worked for 6 years and 7 months will get gratuity for 7 years.

Regards,
Madhu.T.K

He will not be eligible to receive gratuity from the employer under the Payment of Gratuity Act, 1972.

Regards,
R.N.Khola

Hi all, I have one doubt. Please clarify if an employee who has completed 4 years and 160 days is eligible for gratuity or not. I request a reply from anybody. Email: [Email Removed For Privacy Reasons]

I have completed 12 years of service in a public limited company. I applied for gratuity using Form I. However, they refused, stating that I am an accountant for that company and did not provide any gratuity payment. Despite sending numerous letters and emails, there has been no response. I then filed a legal petition with the Deputy Commissioner of Labor, but unfortunately, the post has been vacant for the past three years. Only a case number has been allotted, but there has been no progress.

In this situation, some individuals have mentioned that only employees with a minimum of 3 years of service are eligible to claim gratuity. They believe that service exceeding 3 years is not considered.

Please advise on the immediate course of action. Additionally, I would appreciate guidance on how to address these issues effectively.

Regards,
ldnagesh