Hi,
I want to get clarification on what's the definition of the 5th year to be eligible for gratuity. Is it completion of 240 working days. I am planning to resign 15 days short of my 5th year, however will serve a notice period of 30 days, hence by the time I will leave, I would have served 5 years and 15 days... I assume I am covered... Is this correct? Do we have any case law on this subject? Please help.
Thanks,
Sandy
From India, Ahmadabad
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I want to get clarification on what's the definition of the 5th year to be eligible for gratuity. Is it completion of 240 working days. I am planning to resign 15 days short of my 5th year, however will serve a notice period of 30 days, hence by the time I will leave, I would have served 5 years and 15 days... I assume I am covered... Is this correct? Do we have any case law on this subject? Please help.
Thanks,
Sandy
From India, Ahmadabad
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Hi
Sandy
Gratuity is a lump sum payment to employee when he retires or leaves service. It is basically a retirement benefit to an employee so that he can live life comfortably after retirement. However, under Gratuity Act, gratuity is payable even to an employee who resigns after completing at least 5 years of service.
Gratuity is reward for good, efficient and faithful service rendered for a considerable period.
Employees eligible for gratuity – ’Employee’ means any person (other than apprentice) employed on wages in any establishment, factory, mine, oilfield, plantation, port, railway company or shop, to do any skilled, semi-skilled or unskilled, manual, supervisory, technical or clerical work, whether terms of such employment are express or implied, and whether such person is employed in a managerial or administrative capacity. However, it does not include any Central/State Government employee. [section 2(e)]. Thus, the Act is applicable to all employees - workers as well as persons employed in administrative and managerial capacity.
Gratuity is payable to a person on (a) resignation (b) termination on account of death or disablement due to accident or disease (c) retirement (d) death. Normally, gratuity is payable only after an employee completes five years of continuous service. In case of death and disablement, the condition of minimum 5 years’ service is not applicable. [section 4(1)].
The Act is applicable to all employees, irrespective of the salary.
Amount of gratuity payable - Gratuity is payable @ 15 days wages for every year of completed service. In the last year of service, if the employee has completed more than 6 months, it will be treated as full year for purpose of gratuity. - - In case of seasonal establishment, gratuity is payable @ 7 days wages for each season. [section 4(2)].
Wages shall consist of basic plus D.A, as per last drawn salary. However, allowances like bonus, commission, HRA, overtime etc. are not to be considered for calculations. [section 2(s)].
In case of employees paid on monthly wages basis, per day wages should be calculated by dividing monthly salary by 26 days to arrive at daily wages e.g. if last drawn salary of a person (basic plus DA) is Rs. 2,600 per month, his salary per day will be Rs. 100 (2,600 divided by 100). Thus, the employee is entitled to get Rs. 1,500 [15 days multiplied by Rs. 100 daily salary] for every year of completed service. If he has completed 30 years of service, he is entitled to get gratuity of Rs. 45,000 (Rs. 1,500 multiplied by 30). Maximum gratuity payable under the Act is Rs. 3.50 lakhs (the ceiling was Rs. 1,00,000 which was increased to 2.50 lakhs on 24.9.97 by an ordinance which was later increased to Rs 3.50 lakhs while converting the ordinance into Act].
Maximum gratuity payable – Maximum gratuity payable is Rs 3.50 lakhs. [Section 4(3)]. [Of course, employer can pay more. Employee has also right to get more if obtainable under an award or contract with employer, as made clear in section 4(5)].
Income-Tax exemption - Gratuity received upto Rs. 3.50 lakhs is exempt from Income Tax. Gratuity paid above that limit is taxable. [section 10(10) of Income Tax Act]. - - However, employee can claim relief u/s 89 in respect of the excess amount.
No Compulsory insurance of gratuity liability – Section 4A provides that every employer must obtain insurance of his gratuity liability with LIC or any other insurer. However, Government companies need not obtain such insurance. If an employee is already member of gratuity fund established by an employer, he has option to continue that arrangement. If an employer employing more than 500 persons establishes an approved gratuity fund, he need not obtain insurance for gratuity liability. - - However, this section has not yet been brought into force. Hence, presently, such compulsory insurance is not necessary.
So don't plan to resign before five years of completion otherwise u will loose your gratuity.
why I am saying so.
your statement "I am planning to resign 15 days short of my 5th year (not completed five year), however will serve notice period of 30 days, hence by the time I will level, would have served 5 years 15 days...
(Now think of situation when your employer accept your resignation on same day.
But if you have mentioned date of leaving while giving resignation and ask them the relieve on such a date which is after five years of service then its is ok.
otherwise it wont work even if you have mentioned and your employer accepted your resignation)
your assumption is not practical.
regards
From India, Bahadurgarh
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51Sandy
Gratuity is a lump sum payment to employee when he retires or leaves service. It is basically a retirement benefit to an employee so that he can live life comfortably after retirement. However, under Gratuity Act, gratuity is payable even to an employee who resigns after completing at least 5 years of service.
Gratuity is reward for good, efficient and faithful service rendered for a considerable period.
Employees eligible for gratuity – ’Employee’ means any person (other than apprentice) employed on wages in any establishment, factory, mine, oilfield, plantation, port, railway company or shop, to do any skilled, semi-skilled or unskilled, manual, supervisory, technical or clerical work, whether terms of such employment are express or implied, and whether such person is employed in a managerial or administrative capacity. However, it does not include any Central/State Government employee. [section 2(e)]. Thus, the Act is applicable to all employees - workers as well as persons employed in administrative and managerial capacity.
Gratuity is payable to a person on (a) resignation (b) termination on account of death or disablement due to accident or disease (c) retirement (d) death. Normally, gratuity is payable only after an employee completes five years of continuous service. In case of death and disablement, the condition of minimum 5 years’ service is not applicable. [section 4(1)].
The Act is applicable to all employees, irrespective of the salary.
Amount of gratuity payable - Gratuity is payable @ 15 days wages for every year of completed service. In the last year of service, if the employee has completed more than 6 months, it will be treated as full year for purpose of gratuity. - - In case of seasonal establishment, gratuity is payable @ 7 days wages for each season. [section 4(2)].
Wages shall consist of basic plus D.A, as per last drawn salary. However, allowances like bonus, commission, HRA, overtime etc. are not to be considered for calculations. [section 2(s)].
In case of employees paid on monthly wages basis, per day wages should be calculated by dividing monthly salary by 26 days to arrive at daily wages e.g. if last drawn salary of a person (basic plus DA) is Rs. 2,600 per month, his salary per day will be Rs. 100 (2,600 divided by 100). Thus, the employee is entitled to get Rs. 1,500 [15 days multiplied by Rs. 100 daily salary] for every year of completed service. If he has completed 30 years of service, he is entitled to get gratuity of Rs. 45,000 (Rs. 1,500 multiplied by 30). Maximum gratuity payable under the Act is Rs. 3.50 lakhs (the ceiling was Rs. 1,00,000 which was increased to 2.50 lakhs on 24.9.97 by an ordinance which was later increased to Rs 3.50 lakhs while converting the ordinance into Act].
Maximum gratuity payable – Maximum gratuity payable is Rs 3.50 lakhs. [Section 4(3)]. [Of course, employer can pay more. Employee has also right to get more if obtainable under an award or contract with employer, as made clear in section 4(5)].
Income-Tax exemption - Gratuity received upto Rs. 3.50 lakhs is exempt from Income Tax. Gratuity paid above that limit is taxable. [section 10(10) of Income Tax Act]. - - However, employee can claim relief u/s 89 in respect of the excess amount.
No Compulsory insurance of gratuity liability – Section 4A provides that every employer must obtain insurance of his gratuity liability with LIC or any other insurer. However, Government companies need not obtain such insurance. If an employee is already member of gratuity fund established by an employer, he has option to continue that arrangement. If an employer employing more than 500 persons establishes an approved gratuity fund, he need not obtain insurance for gratuity liability. - - However, this section has not yet been brought into force. Hence, presently, such compulsory insurance is not necessary.
So don't plan to resign before five years of completion otherwise u will loose your gratuity.
why I am saying so.
your statement "I am planning to resign 15 days short of my 5th year (not completed five year), however will serve notice period of 30 days, hence by the time I will level, would have served 5 years 15 days...
(Now think of situation when your employer accept your resignation on same day.
But if you have mentioned date of leaving while giving resignation and ask them the relieve on such a date which is after five years of service then its is ok.
otherwise it wont work even if you have mentioned and your employer accepted your resignation)
your assumption is not practical.
regards
From India, Bahadurgarh
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Amount of gratuity payable - Gratuity is payable at 15 days' wages for every year of completed service. In the last year of service, if the employee has completed more than 6 months, it will be treated as a full year for the purpose of gratuity. In the case of a seasonal establishment, gratuity is payable at 7 days' wages for each season (section 4(2)).
Hi, If I am not wrong, while calculating the gratuity, more than 4 years and 6 months are taken into consideration for eligibility. Please clarify this. Sashmita
From India, Delhi
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Hi, If I am not wrong, while calculating the gratuity, more than 4 years and 6 months are taken into consideration for eligibility. Please clarify this. Sashmita
From India, Delhi
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Dear Sashmita,
Mr. AKM wrote the correct things. As you mentioned, the information about the service is incorrect. A minimum of 5 years of completed service is required to be eligible for entitlement. Neither the Act provides, nor does the Supreme Court judgment provide for a term of 4 years & 6 months for entitlement. Please note the same.
Regards,
Bhushan
From India, Mumbai
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Mr. AKM wrote the correct things. As you mentioned, the information about the service is incorrect. A minimum of 5 years of completed service is required to be eligible for entitlement. Neither the Act provides, nor does the Supreme Court judgment provide for a term of 4 years & 6 months for entitlement. Please note the same.
Regards,
Bhushan
From India, Mumbai
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Dear All,
Of course, there is a 5-year continuous service in the act, but there is a judgment of some High Court that if an employee has worked for 240 days in the fifth year, it will be counted as the fifth year of service; henceforth, he will be eligible for gratuity.
Regards,
Vikas
From India, Mumbai
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Of course, there is a 5-year continuous service in the act, but there is a judgment of some High Court that if an employee has worked for 240 days in the fifth year, it will be counted as the fifth year of service; henceforth, he will be eligible for gratuity.
Regards,
Vikas
From India, Mumbai
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Dear Friend, Please see the attachment . Brief of the Payment of Gratuity Act. Regards, PBS KUMAR
From India, Kakinada
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From India, Kakinada
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Dear Mr. Kumar,
As I have said, it is a 5-year service in the act, but the court judgment has accepted 240 days of service in the 5th year as eligibility for gratuity. Unfortunately, I can't recapitulate the case law. If you want proof for this, please go through the leading case laws on the subject.
From India, Mumbai
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As I have said, it is a 5-year service in the act, but the court judgment has accepted 240 days of service in the 5th year as eligibility for gratuity. Unfortunately, I can't recapitulate the case law. If you want proof for this, please go through the leading case laws on the subject.
From India, Mumbai
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Dear Vikas ji,
For legal clarifications, please go through the website: www.legalpundits.com.
Regards,
:)
PBS KUMAR
From India, Kakinada
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For legal clarifications, please go through the website: www.legalpundits.com.
Regards,
:)
PBS KUMAR
From India, Kakinada
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Dear Vikas,
It was the judgment of the Madras High Court that if an employee has worked for 240 days in the fifth year, he is eligible for gratuity. The judgment was made in the year 2004. You can refer to the LLR for the year 2004.
Regards,
Vikram Singh
From India, Delhi
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It was the judgment of the Madras High Court that if an employee has worked for 240 days in the fifth year, he is eligible for gratuity. The judgment was made in the year 2004. You can refer to the LLR for the year 2004.
Regards,
Vikram Singh
From India, Delhi
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Is there any official website or written document of the gratuity department that clarifies whether the 30-day notice period would be considered as part of employment when deciding the gratuity payable in case the employee has completed 4 years and 11 months of service? I would appreciate a quick response.
From India, Delhi
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From India, Delhi
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Notice period shall be taken as days worked for the purpose of determination of eligibility and amount of gratuity. Regards, Madhu.T.K
From India, Kannur
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From India, Kannur
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Dear Mr. Vikas,
It is correct that the Supreme Court has given a judgment in one case stating that if you have completed 240 days in the fifth year, you are eligible for gratuity. However, the Gratuity Act does not explicitly mention this provision. If needed, you can file a case to address this issue.
Therefore, the eligibility criteria of completing five years of service still remains to receive gratuity.
Thank you.
J.S. Malik
From India, Delhi
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It is correct that the Supreme Court has given a judgment in one case stating that if you have completed 240 days in the fifth year, you are eligible for gratuity. However, the Gratuity Act does not explicitly mention this provision. If needed, you can file a case to address this issue.
Therefore, the eligibility criteria of completing five years of service still remains to receive gratuity.
Thank you.
J.S. Malik
From India, Delhi
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Dear Sashmita,
Mr. AKM wrote the correct things. As you mention about the service is wrong. Minimum 5 years completed service is required to be eligible for entitlement. Neither the Act provides nor the Supreme Court judgment provides for the term of 4 years & 6 months for entitlement. Please note the same.
Regards,
Bhushan
Dear,
It is not necessary that for the eligibility of Gratuity, the person must have completed 5 years of service. If a person has completed 4 years and 240 working days in the 5th year, he shall be eligible for gratuity. There is a judgment in the Labour Laws Reporter in this regard.
Ak Malhotra
From India, Guwahati
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Mr. AKM wrote the correct things. As you mention about the service is wrong. Minimum 5 years completed service is required to be eligible for entitlement. Neither the Act provides nor the Supreme Court judgment provides for the term of 4 years & 6 months for entitlement. Please note the same.
Regards,
Bhushan
Dear,
It is not necessary that for the eligibility of Gratuity, the person must have completed 5 years of service. If a person has completed 4 years and 240 working days in the 5th year, he shall be eligible for gratuity. There is a judgment in the Labour Laws Reporter in this regard.
Ak Malhotra
From India, Guwahati
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if company has terminated employee due to cost cut wether he his eligible for gratuity or not also he has completed only 3yrs Rgds Swamy
From India, Madras
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From India, Madras
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An employee terminated from service (as a measure of cost-cutting or other reasons) after three years will not be eligible for gratuity, but they shall be eligible for retrenchment compensation at the rate of 15 days' pay for every year of service.
Regards,
Madhu.T.K
From India, Kannur
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Regards,
Madhu.T.K
From India, Kannur
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Dear All,
The judgment cited could be for workmen. Again, merely citing a case law will not be accepted by the management unless there is a demand from the employee followed by a denial. Are you sure your management will accept the concept of 240 days in the final year? The case law will be useful only if you pursue it as a claim filed against the management under the Gratuity Act before the competent forum.
With Regards,
Email: rajanassociates@eth.net
From India, Bangalore
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The judgment cited could be for workmen. Again, merely citing a case law will not be accepted by the management unless there is a demand from the employee followed by a denial. Are you sure your management will accept the concept of 240 days in the final year? The case law will be useful only if you pursue it as a claim filed against the management under the Gratuity Act before the competent forum.
With Regards,
Email: rajanassociates@eth.net
From India, Bangalore
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Hi, I have been denied gratuity after completing 4 years 10 months service. Can law surely help in this regard ? Is law going to favour employer for 5 year minimum service rule.
From India, Gurgaon
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From India, Gurgaon
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Dear Vijay,
This all depends upon the Controlling Authority under the PG Act, 1972 of the area who is hearing and deciding the claim case.
Regards,
R.N. Khola
Skylark Associates, Gurgaon (Haryana)
(Labour Law and Legal Consultants)
09810405361
From India, Delhi
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This all depends upon the Controlling Authority under the PG Act, 1972 of the area who is hearing and deciding the claim case.
Regards,
R.N. Khola
Skylark Associates, Gurgaon (Haryana)
(Labour Law and Legal Consultants)
09810405361
From India, Delhi
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Dear Vijay,
The controlling authority cannot be advised through citehr. This is a quasi-judicial authority that decides the claim case after taking evidence, arguments, and different citations into consideration. You are to file a claim case before your area controlling authority.
Regards,
R.N.Khola
Skylark Associates, Gurgaon (Haryana)
(Labour Law & Legal Consultants)
09810405361
From India, Delhi
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The controlling authority cannot be advised through citehr. This is a quasi-judicial authority that decides the claim case after taking evidence, arguments, and different citations into consideration. You are to file a claim case before your area controlling authority.
Regards,
R.N.Khola
Skylark Associates, Gurgaon (Haryana)
(Labour Law & Legal Consultants)
09810405361
From India, Delhi
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Case Law on Gratuity.doc