Eligibility for Gratuity
Is a person eligible for gratuity after completing 4 years and 183 days of continuous service in one company? I did my research and found mixed answers. Some say eligible and some say not eligible. The company says not eligible. The company states that a person has to serve 4 years and 240 days to be eligible for gratuity. According to the Gratuity Act, is the person authorized for gratuity payment with 4 years and 183 days of continuous service? Please advise.
Is a person eligible for gratuity after completing 4 years and 183 days of continuous service in one company? I did my research and found mixed answers. Some say eligible and some say not eligible. The company says not eligible. The company states that a person has to serve 4 years and 240 days to be eligible for gratuity. According to the Gratuity Act, is the person authorized for gratuity payment with 4 years and 183 days of continuous service? Please advise.
What you have mentioned in the second paragraph of your post is correct. A person has to complete 4 years of continuous service, and in the 5th year, they have to complete 240 days of working (including weekly offs, paid leave periods, company's paid holidays, etc.) to become eligible for gratuity payment.
From India, Aizawl
From India, Aizawl
Thank you for the response, P. Radhakrishnan Nair.
Gratuity Amount in CTC
What happens to the gratuity amount which is part of my CTC at a private IT firm? When I was given the offer, the gratuity amount was shown as part of the CTC. Will I not receive it because I am not fulfilling my eligibility criteria, or is there a way to receive that amount since it was shown as part of my CTC?
Article on Gratuity Eligibility
Also, I came across this article - do you think it's true - https://www.zeebiz.com/personal-fina...-answer-119391
Please let me know.
Thanks and Regards,
John
Gratuity Amount in CTC
What happens to the gratuity amount which is part of my CTC at a private IT firm? When I was given the offer, the gratuity amount was shown as part of the CTC. Will I not receive it because I am not fulfilling my eligibility criteria, or is there a way to receive that amount since it was shown as part of my CTC?
Article on Gratuity Eligibility
Also, I came across this article - do you think it's true - https://www.zeebiz.com/personal-fina...-answer-119391
Please let me know.
Thanks and Regards,
John
As Mr. Rkn indicated, eligibility for gratuity payment arises only after an employee has completed 4 years and 240 days of 'continuous service' criteria. There is also a viewpoint suggesting that, for the purpose of calculating one year of service, 6 months can be rounded off to one year. However, this perspective has not been widely accepted or implemented. It is worth noting that 'CTC' and gratuity are considered part of the package but are not legally recognized as service conditions in our country. Therefore, completing 240 days of service in the 5th year is currently the valid requirement.
Your query regarding CTC has been a topic of discussion in other threads within this forum numerous times. To access these discussions, you can utilize the 'search topic/file' box above.
Thank you.
From India, Bangalore
Your query regarding CTC has been a topic of discussion in other threads within this forum numerous times. To access these discussions, you can utilize the 'search topic/file' box above.
Thank you.
From India, Bangalore
Thank you, Kumar. A couple of days ago, there was news concerning labor reforms related to the Gratuity law. The reform states that the current 5 years will be reduced to a lower figure. If the reform comes into action, can employees go back to their past employers and claim gratuity if they meet the period criteria of the reform? Like in my case, will I be able to go back to my employer and ask for my gratuity once the gratuity reform is passed?
https://trak.in/tags/business/2020/0...labor-reforms/
Thank you,
John
https://trak.in/tags/business/2020/0...labor-reforms/
Thank you,
John
John, I am also providing a link where you will find many discussions on the subject and opinions/views of our learned experts on this matter.
https://www.citehr.com/260004-gratui...ce-period.html
From India, Aizawl
https://www.citehr.com/260004-gratui...ce-period.html
From India, Aizawl
Dear John, it seems you are a student and you are conducting research on gratuity eligibility. I am very new to this forum, not even completing 100 days here. However, I wish to advise you not to draw any conclusions on any subject solely based on views expressed here. Do not rely on links or Google, or even media news. Instead, refer to the latest editions of Bare Acts, case laws, and other authentic materials. Form your own interpretation, engage with experts around you, and logically analyze the subject.
Draft Code on the Social Security Bill
On the current topic, you should also read the draft code on the social security bill. If the Government is considering lowering the gratuity threshold, it should be reflected in the draft bill. There have been many suggestions like this over the years, but they have not been included in the draft bill. Yet, we continue to discuss them as if they are existing laws.
I am not implying that the lower threshold will never be implemented, but when it does, we can discuss it then. Even if it is introduced, it will not have a retrospective effect. Currently, the law states that one must complete 5 years of service to be eligible for gratuity. The exception is the High Court jurisdiction in Chennai and Kerala.
Gratuity Payment Without Completing 4 Years and 240 Days
One may receive gratuity payment even without completing 4 years and 240 days. This should not be misunderstood as the law, though. No one will object to receiving gratuity early, but it does not change the legal requirements.
Kind regards
From India, Mumbai
Draft Code on the Social Security Bill
On the current topic, you should also read the draft code on the social security bill. If the Government is considering lowering the gratuity threshold, it should be reflected in the draft bill. There have been many suggestions like this over the years, but they have not been included in the draft bill. Yet, we continue to discuss them as if they are existing laws.
I am not implying that the lower threshold will never be implemented, but when it does, we can discuss it then. Even if it is introduced, it will not have a retrospective effect. Currently, the law states that one must complete 5 years of service to be eligible for gratuity. The exception is the High Court jurisdiction in Chennai and Kerala.
Gratuity Payment Without Completing 4 Years and 240 Days
One may receive gratuity payment even without completing 4 years and 240 days. This should not be misunderstood as the law, though. No one will object to receiving gratuity early, but it does not change the legal requirements.
Kind regards
From India, Mumbai
Clarification on Gratuity Eligibility
Further to my earlier post, I wish to make it clear that I do not disrespect different views or interpretations. They must be justifiable or have some authentic support.
I respect the views on gratuity eligibility based on judgments by the High Courts at the judicature of Chennai and Kerala, but those are not applicable outside their jurisdictions. The law has also not been amended. Even in the draft code bill, this is not addressed.
If the Madras High Court judgment of 1998 is applicable all over India, then how was the gratuity claim of Sreeja upheld by the controlling authority subsequent to this judgment, and the appellate authority reversed the decision, accepting the employer's contention that gratuity entitlement would arise only on the completion of five continuous years of service?
I am not denying that one can apply the analogy of these judgments while arguing the case for payment of gratuity for 4 years and 240 days.
From India, Mumbai
Further to my earlier post, I wish to make it clear that I do not disrespect different views or interpretations. They must be justifiable or have some authentic support.
I respect the views on gratuity eligibility based on judgments by the High Courts at the judicature of Chennai and Kerala, but those are not applicable outside their jurisdictions. The law has also not been amended. Even in the draft code bill, this is not addressed.
If the Madras High Court judgment of 1998 is applicable all over India, then how was the gratuity claim of Sreeja upheld by the controlling authority subsequent to this judgment, and the appellate authority reversed the decision, accepting the employer's contention that gratuity entitlement would arise only on the completion of five continuous years of service?
I am not denying that one can apply the analogy of these judgments while arguing the case for payment of gratuity for 4 years and 240 days.
From India, Mumbai
For eligibility for the payment of gratuity, completion of 4 years and 240 days is required instead of 4 years and 183 days. Therefore, payment should not be made if eligibility is not completed.
Thanks & Regards,
Sumit Kumar Saxena
From India, Ghaziabad
Thanks & Regards,
Sumit Kumar Saxena
From India, Ghaziabad
Dear friends,
Eligibility for Gratuity Payment
Eligibility for gratuity payment for those who have served less than 5 years of "continuous service" has been discussed repeatedly in this forum. Many establishments have accepted and paid gratuity based on the Madras High Court judgment, which concluded that 4 years and 240 days in the 5th year would meet the eligibility criteria. However, others have raised doubts about whether the Madras HC judgment automatically applies to other states, as there has been no clear amendment to the Act specifying a "5-year" requirement. This debate persists even though the Honorable Supreme Court has also confirmed that 4 years plus 240 days in the 5th year meets the eligibility criteria in the case of "LALAPPA LINGAPPA & ORS V. LAXMI VISHNU TEXTILE MILLS LTD., SHOLAPUR [1981] RD-SC 29 (11 February 1981)."
I believe it is appropriate to state that the contents of this judgment are applicable not only to the state of Maharashtra, where the cause of action originated, but to the entire nation as per the Constitution of India. In addition to this Supreme Court judgment, another SC judgment upholding the 4 years + 240 days norm for determining "continuous service" is also available, which I referenced in this column a few years ago and will repost shortly.
Excerpts from the Cited SC Judgment
I may quote excerpts from the cited SC judgment as follows (it is lengthy to reproduce here but worth the space and time taken to remove lingering doubts): "The significance of this legislation lies in the acceptance of the principle of gratuity as a compulsory, statutory retiral benefit. For a proper appreciation of the question involved, it is necessary to set out the relevant provisions of the Act. Sub-section (1) of s. 4 reads as follows: 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; 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; Provided further that in the case of death of the employee, gratuity payable to him shall be paid to his nominee or, if no nomination has been made, to his heirs..."
References:
- https://www.citehr.com/473683-gratui...ml#post2098224
- https://www.citehr.com/440537-gratui...ml#post1993632
- https://www.citehr.com/337506-can-gr...ml#post2162288
- https://www.citehr.com/517210-gratui...ml#post2402006
- https://www.citehr.com/440537-gratui...-10-a-pg2.html
- https://www.citehr.com/440537-gratui...ml#post1993632
Thank you.
From India, Bangalore
Eligibility for Gratuity Payment
Eligibility for gratuity payment for those who have served less than 5 years of "continuous service" has been discussed repeatedly in this forum. Many establishments have accepted and paid gratuity based on the Madras High Court judgment, which concluded that 4 years and 240 days in the 5th year would meet the eligibility criteria. However, others have raised doubts about whether the Madras HC judgment automatically applies to other states, as there has been no clear amendment to the Act specifying a "5-year" requirement. This debate persists even though the Honorable Supreme Court has also confirmed that 4 years plus 240 days in the 5th year meets the eligibility criteria in the case of "LALAPPA LINGAPPA & ORS V. LAXMI VISHNU TEXTILE MILLS LTD., SHOLAPUR [1981] RD-SC 29 (11 February 1981)."
I believe it is appropriate to state that the contents of this judgment are applicable not only to the state of Maharashtra, where the cause of action originated, but to the entire nation as per the Constitution of India. In addition to this Supreme Court judgment, another SC judgment upholding the 4 years + 240 days norm for determining "continuous service" is also available, which I referenced in this column a few years ago and will repost shortly.
Excerpts from the Cited SC Judgment
I may quote excerpts from the cited SC judgment as follows (it is lengthy to reproduce here but worth the space and time taken to remove lingering doubts): "The significance of this legislation lies in the acceptance of the principle of gratuity as a compulsory, statutory retiral benefit. For a proper appreciation of the question involved, it is necessary to set out the relevant provisions of the Act. Sub-section (1) of s. 4 reads as follows: 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; 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; Provided further that in the case of death of the employee, gratuity payable to him shall be paid to his nominee or, if no nomination has been made, to his heirs..."
References:
- https://www.citehr.com/473683-gratui...ml#post2098224
- https://www.citehr.com/440537-gratui...ml#post1993632
- https://www.citehr.com/337506-can-gr...ml#post2162288
- https://www.citehr.com/517210-gratui...ml#post2402006
- https://www.citehr.com/440537-gratui...-10-a-pg2.html
- https://www.citehr.com/440537-gratui...ml#post1993632
Thank you.
From India, Bangalore
Dear Prof. Kumar,
This will probably be my last post on gratuity. It is incorrect to say that for the payment of gratuity, the Honorable SC also held that 4 years + 240 days in the 5th year for determining 'continuous service' meets the eligibility criteria in the case of "Lalappa Lingappa & Ors v. Laxmi Vishnu Textile Mills Ltd., Sholapur [1981] RD-SC 29 (11 February 1981)."
This matter does not pertain to the Payment of Gratuity Act, which is an independent enactment under social security. How do the Madras HC (1998) and Kerala HC (2015) entertain the applications when there is an SC judgment (1981)?
If any employer is considering gratuity for 4 years and 240 days in the fifth year or even for lesser service than this, I have no objection. But that is not the law. The law is what is stated in the POG Act, which has not yet been amended based on the interpretation by the HC at the judicature in Chennai and Kerala.
I am sorry to have this kind of conversation with you. I even respect the judgments by the HC at the judicature in Chennai and Kerala, as I mentioned earlier.
With this, I conclude this topic for myself and for those whom I advise.
From India, Mumbai
This will probably be my last post on gratuity. It is incorrect to say that for the payment of gratuity, the Honorable SC also held that 4 years + 240 days in the 5th year for determining 'continuous service' meets the eligibility criteria in the case of "Lalappa Lingappa & Ors v. Laxmi Vishnu Textile Mills Ltd., Sholapur [1981] RD-SC 29 (11 February 1981)."
This matter does not pertain to the Payment of Gratuity Act, which is an independent enactment under social security. How do the Madras HC (1998) and Kerala HC (2015) entertain the applications when there is an SC judgment (1981)?
If any employer is considering gratuity for 4 years and 240 days in the fifth year or even for lesser service than this, I have no objection. But that is not the law. The law is what is stated in the POG Act, which has not yet been amended based on the interpretation by the HC at the judicature in Chennai and Kerala.
I am sorry to have this kind of conversation with you. I even respect the judgments by the HC at the judicature in Chennai and Kerala, as I mentioned earlier.
With this, I conclude this topic for myself and for those whom I advise.
From India, Mumbai
I believe this thread is now filled with detailed interpretations from members, which, in my opinion, does not serve the intended purpose. The original poster did not receive a definitive reply. The poster is seeking clarification on the eligibility for gratuity payment after completing 4 years and 183 days of service. In one part of the post, the poster acknowledges that their company has mentioned ineligibility for gratuity payment due to not meeting the eligibility criteria.
A clear one-line answer was provided in response to their second query.
From India, Aizawl
A clear one-line answer was provided in response to their second query.
From India, Aizawl
Dear friends, the PG Act and the Rules made thereunder, when read together, should clear the air. Please read the highlighted portions of Rules-Form-U on pages 26 and 27 (attached in full). I don't think any more explanatory notes would be needed.
From India, Bangalore
From India, Bangalore
Dear friend, Service of 4 yrs & 183 days, beyond doubt, not eligible. This has been opined by many of our members. No ambiguity. What’s still continuing is, as you know, 4+240 days.
From India, Bangalore
From India, Bangalore
Hi Mercury2007, from the discussion, what I understand is that you had been working in an IT firm. If the firm had a working duration of less than 6 days in a week, like, for example, having Saturday and Sunday off, this could put the eligibility period at 4 years and 190 calendar days. If not, it should be as per the usual duration of 4 years and 240 days.
In either case, I believe it is clear that you would not be eligible for the gratuity payment. As for the gratuity provision that had been part of the CTC stack, I do not see any way to get this paid out to you.
From India, Bengaluru
In either case, I believe it is clear that you would not be eligible for the gratuity payment. As for the gratuity provision that had been part of the CTC stack, I do not see any way to get this paid out to you.
From India, Bengaluru
Dear Prof. Kumar, thanks for quoting the Lalappa Lingappa case. I mistakenly took it as the Surendra Kumar Varma case and said that this matter is not pertaining to the Payment of Gratuity Act. I am sorry for that.
The Lalappa Lingappa Case and Continuous Service
The Lalappa Lingappa case reminded me that the definition of 'continuous service' was introduced by the insertion of an independent section 2A by way of amendment in 1984, effective from 1981, which followed this case of Lalappa Lingappa. I remember this and therefore conducted further study when I came across a thread on this forum where Adv. Keshav Kogaonkar from Mumbai interacted on the same subject. His interaction was appreciated by our senior member, none other than Umakanthan Sir and KK!HR, who is one of the most appreciated members and a Super Moderator at this forum.
The said thread is given in the link below:
https://www.citehr.com/591113-what-m...tuity-act.html
Gratuity for Long Service
According to me, the concept of gratuity for long service has not been completely abandoned, but provision has been made to pay gratuity to those who are in service for five years and more. I would like to draw your attention to the judgment of the Hon'ble SC in Straw Board Mfg. Co. 1977 II (LLJ 463).
It was observed by the Hon'ble SC in this case that the sense of national consciousness is reflected in the Gratuity Act, which fixes the period of 5 years as the qualifying year for earning gratuity. The concept of gratuity was initially a gratuitous payment for long and meritorious service rendered by the employee in an organization. The qualifying length was reduced to 5 years, and the law was enacted in 1972.
In fact, I had decided not to contribute any more on this subject. But since I made a mistake in reading the Lalappa Lingappa case as the Surendra Kumar Varma case, I thought of posting it. Many learned professionals, though they do not contribute here on CiteHR, read it, which I know. To them, the message should not go wrong. This is the purpose of this post.
From India, Mumbai
The Lalappa Lingappa Case and Continuous Service
The Lalappa Lingappa case reminded me that the definition of 'continuous service' was introduced by the insertion of an independent section 2A by way of amendment in 1984, effective from 1981, which followed this case of Lalappa Lingappa. I remember this and therefore conducted further study when I came across a thread on this forum where Adv. Keshav Kogaonkar from Mumbai interacted on the same subject. His interaction was appreciated by our senior member, none other than Umakanthan Sir and KK!HR, who is one of the most appreciated members and a Super Moderator at this forum.
The said thread is given in the link below:
https://www.citehr.com/591113-what-m...tuity-act.html
Gratuity for Long Service
According to me, the concept of gratuity for long service has not been completely abandoned, but provision has been made to pay gratuity to those who are in service for five years and more. I would like to draw your attention to the judgment of the Hon'ble SC in Straw Board Mfg. Co. 1977 II (LLJ 463).
It was observed by the Hon'ble SC in this case that the sense of national consciousness is reflected in the Gratuity Act, which fixes the period of 5 years as the qualifying year for earning gratuity. The concept of gratuity was initially a gratuitous payment for long and meritorious service rendered by the employee in an organization. The qualifying length was reduced to 5 years, and the law was enacted in 1972.
In fact, I had decided not to contribute any more on this subject. But since I made a mistake in reading the Lalappa Lingappa case as the Surendra Kumar Varma case, I thought of posting it. Many learned professionals, though they do not contribute here on CiteHR, read it, which I know. To them, the message should not go wrong. This is the purpose of this post.
From India, Mumbai
Hi Mercury and other friends, pardon me for missing one more point here.
Section 4(2) of the PG Act
"... that for every completed year of service in excess of six months, the employer shall pay gratuity to an employee. That means if an employee works in the establishment for more than 6 months in a year, he shall be eligible to get gratuity at the prescribed rate."
The extract of this section is reproduced here:
xxxx
Payment of gratuity
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 an accident or disease:
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:
4*[Provided further that in the case of death of the employee, gratuity payable to him shall be paid to his nominee or, if no nomination has been made, to his heirs, and where any such nominees or heirs are minors, the share of such minors shall be deposited with the controlling authority who shall invest the same for the benefit of such minors in such a bank or other financial institution, as may be prescribed, until such minors attain majority.]
Explanation: For the purposes of this section, disablement means such disablement as incapacitates an employee from the work which he was capable of performing before the accident or disease resulting in such disablement.
(2) For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days' wages based on the rate of wages last drawn by the employee concerned: Provided that in the case of a piece-rated employee, daily wages shall be computed on the average of the total wages received by him for a period of three months immediately preceding the termination of his employment, and, for this purpose, the wages paid for any overtime work shall not be taken into account:
Provided further that in the case of 1*["an employee who is employed in a seasonal establishment and who is not so employed throughout the year"], the employer shall pay the gratuity at the rate of seven days' wages for each season.
xxxxxxxx
I hope you would have completed 6 months of service; can you please check on this aspect and find out whether you got it right?
Also, read more when discussed on rounding of 6 months of service to one year earlier also in this link:
https://www.citehr.com/462940-paymen...-7-months.html
From India, Bangalore
Section 4(2) of the PG Act
"... that for every completed year of service in excess of six months, the employer shall pay gratuity to an employee. That means if an employee works in the establishment for more than 6 months in a year, he shall be eligible to get gratuity at the prescribed rate."
The extract of this section is reproduced here:
xxxx
Payment of gratuity
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 an accident or disease:
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:
4*[Provided further that in the case of death of the employee, gratuity payable to him shall be paid to his nominee or, if no nomination has been made, to his heirs, and where any such nominees or heirs are minors, the share of such minors shall be deposited with the controlling authority who shall invest the same for the benefit of such minors in such a bank or other financial institution, as may be prescribed, until such minors attain majority.]
Explanation: For the purposes of this section, disablement means such disablement as incapacitates an employee from the work which he was capable of performing before the accident or disease resulting in such disablement.
(2) For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days' wages based on the rate of wages last drawn by the employee concerned: Provided that in the case of a piece-rated employee, daily wages shall be computed on the average of the total wages received by him for a period of three months immediately preceding the termination of his employment, and, for this purpose, the wages paid for any overtime work shall not be taken into account:
Provided further that in the case of 1*["an employee who is employed in a seasonal establishment and who is not so employed throughout the year"], the employer shall pay the gratuity at the rate of seven days' wages for each season.
xxxxxxxx
I hope you would have completed 6 months of service; can you please check on this aspect and find out whether you got it right?
Also, read more when discussed on rounding of 6 months of service to one year earlier also in this link:
https://www.citehr.com/462940-paymen...-7-months.html
From India, Bangalore
Dear All, I have gone through the views of everyone on the issue and have also reviewed the judgment of the Madras High Court. With due respect to the judgments of the Madras and Kerala High Courts, it is submitted that if 240 days is the required work period over 12 months to ensure continuous and uninterrupted service, then there is no logic in having a qualifying period of 5 years for gratuity entitlement. Furthermore, why should it only be 240 days in the 5th year and not in all the years from the 1st year to the 5th year? If that is the ratio, then every employee who completes 240 days each year from the 1st year to the 5th year should be entitled to gratuity. This, according to me, could never have been the intention of the legislature because if that had been the intention, there would be no need for the sentence "he has rendered continuous service for not less than five years" in Section 4(1) of the Act.
I had written an article on the issue, which was published in 2019 (160) FLR Journal Section Page 90 onwards. For ready reference, the same is attached herewith.
Thanks,
S.SENSHARMA
From India, undefined
I had written an article on the issue, which was published in 2019 (160) FLR Journal Section Page 90 onwards. For ready reference, the same is attached herewith.
Thanks,
S.SENSHARMA
From India, undefined
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