Gratuity Eligibility Query
Our company operates five days a week (due to extended hours). An employee joined our company on 01.03.2008. He has submitted his resignation and will be relieved on 26.10.12 after serving the notice period. Hence, he has worked exactly for 4 years and 240 days. If we exclude the weekends, i.e., Saturday and Sunday, then he has worked for 4 years and 172 days. Is he eligible for gratuity? Please clarify.
Regards,
Harish
From India, Bangalore
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1Our company operates five days a week (due to extended hours). An employee joined our company on 01.03.2008. He has submitted his resignation and will be relieved on 26.10.12 after serving the notice period. Hence, he has worked exactly for 4 years and 240 days. If we exclude the weekends, i.e., Saturday and Sunday, then he has worked for 4 years and 172 days. Is he eligible for gratuity? Please clarify.
Regards,
Harish
From India, Bangalore
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5 days working or 6 days working does not have any relation to calculating the 240 days. This includes working days, weekly offs, holidays, leaves, even maternity leaves, or any layoff period.
For eligibility for gratuity, 5 years of service are a must. However, if your company provides gratuity after completing 240 days in the fifth year, then it is acceptable, and the individual is entitled to receive it. Legally, 5 years of service are necessary to become eligible for the same.
Regards
From India, Delhi
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For eligibility for gratuity, 5 years of service are a must. However, if your company provides gratuity after completing 240 days in the fifth year, then it is acceptable, and the individual is entitled to receive it. Legally, 5 years of service are necessary to become eligible for the same.
Regards
From India, Delhi
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Dear Mr.Harish, One is eligible for gratuity if he worked for 4 years and 240 days. Please find the attachement of madras high court judgment in this subject. regards S.GANAPATHY
From India, Coimbatore
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From India, Coimbatore
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The court gives judgments in various cases, and these judgments can only be considered when the act is not clear. Judgments are given based on the circumstances of the case. The Gratuity Act clearly mentions in the applicability clause that gratuity is applicable only after the completion of five years.
From India, Delhi
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From India, Delhi
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As per the Gratuity Act, an employee who has completed 5 years of service is eligible to receive gratuity. However, if they have completed 240 days, including public holidays, paid leave, casual leave, sick leave, weekly offs, etc., in the 5th year, then they are eligible to receive gratuity.
Thanks & Regards,
Ganesh Mishra
From India, Bangalore
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Thanks & Regards,
Ganesh Mishra
From India, Bangalore
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He is eligible for gratuity. By virtue of the judgment of the Supreme Court rendered under the provisions of the Industrial Dispute Act in Surendra Kumar Verma vs. Central Govt. Industrial Tribunal, [(1980) (4) S.C.C.433)], it is enough that an employee has a service of 240 days in the preceding 12 months, and it is not necessary that he should have completed one whole year's service. As the definition of continuous service in the Industrial Dispute Act and the Payment of Gratuity Act are synonymous, the same principle can be adopted under the act also. Hence, an employee rendering service of 4 years, 10 months, and 11 days is considered to have completed 5 years of continuous service under sec.4(2) and thereby is eligible for gratuity.
Eligibility for Gratuity
In order to be eligible for gratuity, an employee should have at least 4.8 years of continuous service with the employer.
An employee is considered in service in a calendar year provided he has worked for:
- 190 days if the employee is employed below the ground (4.6 years)
- 240 days in any other case (above the ground 4.8 years)
Hope this discussion ends on a positive note.
Regards,
Sohail Shaikh
From India, Mumbai
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Eligibility for Gratuity
In order to be eligible for gratuity, an employee should have at least 4.8 years of continuous service with the employer.
An employee is considered in service in a calendar year provided he has worked for:
- 190 days if the employee is employed below the ground (4.6 years)
- 240 days in any other case (above the ground 4.8 years)
Hope this discussion ends on a positive note.
Regards,
Sohail Shaikh
From India, Mumbai
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Dear Harish,
For eligibility for gratuity, you have to serve for 5 years. Most people refer to the Madras High Court judgment for 4 years and 240 days, but it cannot be applicable to all. If everyone is referring to that, it means there is a judgment in P. Raghuvulua and Sons Vs. Additional Labour Court (1985) where an employee who served for 4 years, 11 months, and 10 days was not eligible for gratuity.
All Judgments Cannot Be Taken for Granted
Even though in the Gratuity Act, Section 2A, the continuous service definition is given, Section 4 of POG clearly states as follows:
Section 4: Payment of Gratuity
(1) Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years:
(a) on his superannuation, or
(b) on his retirement or resignation, or
(c) on his death or disablement due to accident or disease:
So, gratuity is applicable only when you complete 5 years, and the continuous service definition can be taken into account only when you are denied payment by the company after completing 5 years. Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement.
Unless there is an amendment in the POG, you cannot refer to the judgment for all cases.
Regards,
From India, Mumbai
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For eligibility for gratuity, you have to serve for 5 years. Most people refer to the Madras High Court judgment for 4 years and 240 days, but it cannot be applicable to all. If everyone is referring to that, it means there is a judgment in P. Raghuvulua and Sons Vs. Additional Labour Court (1985) where an employee who served for 4 years, 11 months, and 10 days was not eligible for gratuity.
All Judgments Cannot Be Taken for Granted
Even though in the Gratuity Act, Section 2A, the continuous service definition is given, Section 4 of POG clearly states as follows:
Section 4: Payment of Gratuity
(1) Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years:
(a) on his superannuation, or
(b) on his retirement or resignation, or
(c) on his death or disablement due to accident or disease:
So, gratuity is applicable only when you complete 5 years, and the continuous service definition can be taken into account only when you are denied payment by the company after completing 5 years. Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement.
Unless there is an amendment in the POG, you cannot refer to the judgment for all cases.
Regards,
From India, Mumbai
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I also agree with Mr. Keshav. Both the judgments given in the Madras High Court and the Honorable Supreme Court considered the definition of Section 25B of the ID Act for the reference of continuous service. However, the same cannot be applied to the S&E Act or any other act where the ID Act doesn't apply.
From India, Mumbai
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From India, Mumbai
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I think we need to first determine whether the employee is covered under the Payment of Gratuity Act or not. If he is covered under the Gratuity Act, then no other act is applicable, and he is not entitled to the payment of gratuity as per the act since he has not completed 5 years of service. However, if he is not covered under the Payment of Gratuity Act, then he is covered by the Industrial Dispute Act, and the various judgments passed in all the cases referred to above can be considered, and he is eligible to claim gratuity.
Thanks & Regards,
Moiz Modi
HR Executive
From India, Mumbai
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Thanks & Regards,
Moiz Modi
HR Executive
From India, Mumbai
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I agree with Shri J.S. Malikji and others who have clearly stated, "Gratuity is not applicable" for 4 years and 240 days of service. This 240 days of service comes into consideration only after completing 5 years. However, if the company wishes to grant it, considering the goodwill of the company and the performance of the employee, it is your company's gesture. The Gratuity Act has not been amended.
Court Rulings and Gratuity
If we refer to Court Rulings (Madras HC), there are judgments that allow minimum wages to be split for PF contributions purposes. Does the EPFO consider all such judgments? No. Hence, judgments are made on a case-by-case basis and do not generally apply to the respective Act or Rules unless they are amended and gazetted.
From India, Madras
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Court Rulings and Gratuity
If we refer to Court Rulings (Madras HC), there are judgments that allow minimum wages to be split for PF contributions purposes. Does the EPFO consider all such judgments? No. Hence, judgments are made on a case-by-case basis and do not generally apply to the respective Act or Rules unless they are amended and gazetted.
From India, Madras
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Yes, he is eligible for gratuity payment. We have also made payments in the past under the same circumstances, citing a court ruling. Court rulings are binding on establishments. It is a fact that no one can deny.
Regards,
From India, Mumbai
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Regards,
From India, Mumbai
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Yes, an employee is eligible for gratuity if they have worked for 4 years and 240 days in the fifth year. In this case, you have paid a salary for the whole year, whether it is a 5-day week or a 6-day week.
From India, Bangalore
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From India, Bangalore
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Dear Mr. Malik,
Clarification on Gratuity Eligibility
The Act itself is clear on this subject that 4 years and 240 days of service equate to 5 years of service, as the act states 5 years of continuous service. Now, for this, we have to see the definition of one continuous year of service, which is given under section 2A of the Payment of Gratuity Act. The same is reproduced for your reference:
2A. Continuous Service
For the purposes of this Act:
1. An employee shall be said to be in continuous service for a period if he has, for that period, been in uninterrupted service, including service which may be interrupted on account of sickness, accident, leave, absence from duty without leave (not being absence in respect of which an order treating the absence as a break in service has been passed in accordance with the standing orders, rules, or regulations governing the employees of the establishment), lay-off, strike, or a lock-out or cessation of work not due to any fault of the employee, whether such uninterrupted or interrupted service was rendered before or after the commencement of this Act.
2. Where an employee (not being an employee employed in a seasonal establishment) is not in continuous service within the meaning of clause (1), for any period of one year or six months, he shall be deemed to be in continuous service under the employer:
(a) For the said period of one year, if the employee during the period of twelve calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than:
(i) One hundred and ninety days, in the case of any employee employed below the ground in a mine or in an establishment which works for less than six days in a week; and
(ii) Two hundred and forty days, in any other case;
(b) For the said period of six months, 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) Ninety-five days, in the case of an employee employed below the ground in a mine or in an establishment which works for less than six days in a week; and
(ii) One hundred and twenty days, in any other case.
3. Explanation: For the purposes of clause (2), the number of days on which an employee has actually worked under an employer shall include the days on which:
(i) He has been laid-off under an agreement or as permitted by standing orders made under the Industrial Employment (Standing Orders) Act, 1946, or under the Industrial Disputes Act, 1947, or under any other law applicable to the establishment;
(ii) He has been on leave with full wages, earned in the previous year;
(iii) He has been absent due to temporary disablement caused by an accident arising out of and in the course of his employment; and
(iv) In the case of a female, she has been on maternity leave; so, however, that the total period of such maternity leave does not exceed twelve weeks.
4. Where an employee, employed in a seasonal establishment, is not in continuous service within the meaning of clause (1), for any period of one year or six months, he shall be deemed to be in continuous service under the employer for such period if he has actually worked for not less than seventy-five percent of the number of days on which the establishment was in operation during such period.
As per the above definition, when an employee completes 4 years and 240 days (one year of continuous service) in the fifth year, he becomes eligible for gratuity. This is the fundamental understanding clarified by courts in various judgments cited by worthy members in the post. Hope this clarifies the position of the act.
Regards,
From India, New Delhi
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Clarification on Gratuity Eligibility
The Act itself is clear on this subject that 4 years and 240 days of service equate to 5 years of service, as the act states 5 years of continuous service. Now, for this, we have to see the definition of one continuous year of service, which is given under section 2A of the Payment of Gratuity Act. The same is reproduced for your reference:
2A. Continuous Service
For the purposes of this Act:
1. An employee shall be said to be in continuous service for a period if he has, for that period, been in uninterrupted service, including service which may be interrupted on account of sickness, accident, leave, absence from duty without leave (not being absence in respect of which an order treating the absence as a break in service has been passed in accordance with the standing orders, rules, or regulations governing the employees of the establishment), lay-off, strike, or a lock-out or cessation of work not due to any fault of the employee, whether such uninterrupted or interrupted service was rendered before or after the commencement of this Act.
2. Where an employee (not being an employee employed in a seasonal establishment) is not in continuous service within the meaning of clause (1), for any period of one year or six months, he shall be deemed to be in continuous service under the employer:
(a) For the said period of one year, if the employee during the period of twelve calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than:
(i) One hundred and ninety days, in the case of any employee employed below the ground in a mine or in an establishment which works for less than six days in a week; and
(ii) Two hundred and forty days, in any other case;
(b) For the said period of six months, 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) Ninety-five days, in the case of an employee employed below the ground in a mine or in an establishment which works for less than six days in a week; and
(ii) One hundred and twenty days, in any other case.
3. Explanation: For the purposes of clause (2), the number of days on which an employee has actually worked under an employer shall include the days on which:
(i) He has been laid-off under an agreement or as permitted by standing orders made under the Industrial Employment (Standing Orders) Act, 1946, or under the Industrial Disputes Act, 1947, or under any other law applicable to the establishment;
(ii) He has been on leave with full wages, earned in the previous year;
(iii) He has been absent due to temporary disablement caused by an accident arising out of and in the course of his employment; and
(iv) In the case of a female, she has been on maternity leave; so, however, that the total period of such maternity leave does not exceed twelve weeks.
4. Where an employee, employed in a seasonal establishment, is not in continuous service within the meaning of clause (1), for any period of one year or six months, he shall be deemed to be in continuous service under the employer for such period if he has actually worked for not less than seventy-five percent of the number of days on which the establishment was in operation during such period.
As per the above definition, when an employee completes 4 years and 240 days (one year of continuous service) in the fifth year, he becomes eligible for gratuity. This is the fundamental understanding clarified by courts in various judgments cited by worthy members in the post. Hope this clarifies the position of the act.
Regards,
From India, New Delhi
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Dear All, this is very simple—if an employer wants to pay gratuity, then all references in favor could be used. On the contrary, if they want to deny it, they can do so. This is purely about willingness or unwillingness. Even the Supreme Court did not stay the 4-year + 240 days norm. We are not in Tamil Nadu. We have used this norm in our company for several cases and settled them. No one should prevent those who are willing. Every good thing is there for using them for the good of others. It's a case of pessimist versus optimist.
Regards,
Kumar S.
From India, Bangalore
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Regards,
Kumar S.
From India, Bangalore
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Gratuity-Contin uous Service-countin g broken period with same employer-Madras HC Judgment.docx
Less than 5 years service - Eligibility for payment of gratuity.pdf