Gratuity Eligibility - "Gratuity Act" itself mentions 4 years continuous service and 5th year 240 days come under this Gratuity eligibility

@Madhu Sir,

My query is that if an employee completed 5 years of continues service in a company however in consecutive 3rd & 4th year his paid days is less than 240 days due to unauthorized absent. Now will he eligible for gratuity?

Dear Jyoti Prakash,

First and foremost, we should carefully distinguish the eligibility for statutory gratuity and the entitlement to claim it.
If we read the entire provisions of section 2-A of the PGA,1972, thoroughly understand the contents of the admissible breaks in service mentioned therein, and apply them to the similar situation we come across, we can determine the eligibility for gratuity based on section 2-A read with section 4(1).

Section 2-A defines at the outset what " continuous service " is for the purpose of the Act. Simply put, it is uninterrupted service. At the same time, there may be some interruptions or breaks in service which cannot be attributed on the part of the employee. They can be due to (1) sickness (2) accident (3) leave (4) absence from duty without leave i.e., unauthorized absence which is not treated by the employer as break in service under the service regulations (4) lay-off or (5) a strike or a lock out or a cessation of work not due to the fault of the employee. Therefore, these breaks have to be treated as no breaks for determining continuous service under the Act for the purpose of calculation of gratuity.

Sub-sections (2) and (3) provides for the minimum length of continuous service in terms of one year or six months in respect of service in certain establishments and in terms of seasons in respect of seasonal establishments respectively.

Thus, counting backwards from the date of termination of service, if an employee has completed not less than five years of continuous service in the same establishment, he fulfills the eligibility criterion.

But the entitlement criterion becomes yearly basis under the provisions of sub-section (2) of Section 4 which stipulates that gratuity should be paid for every completed year of service or part thereof in excess of six months at a specified rate. It implies automatically that after getting qualified, the employee would be entitled to claim gratuity only in respect of those years in which he rendered continuous service as per the provisions of section 2-A.

Therefore, if the unauthorized absence in the 3rd and 4th years is not declared by the employer as break in service under the service regulations or rules, the employee is entitled to gratuity to the entire 5 years of service.

To make it more clear and in continuation of what Umakanthan Sir has said, I would like to say that if the unathorised absence has not been evidenced by any disciplinary action the period of absence will be counted as continuous service. At the same time, if any disciplinary action has been taken against the employee for his unauthorised absence, then the period will be recorded as break in service.

As per my information, the calculation/eligibility to gratuity, once one completes services of 5 years (from date of joining to date of leaving). The period completed should be 5 years but not 4+years & all the years of service should be of continuous nature. Nowadays, people are offering such n such HC/SC passed orders. The order passed are only case specific rather not against or obsoleting the Acts and Rules are on. Therefore, one is free to follow or not to follow as per the requirements of the establishment.

Sorry to differ with you, Mr.Prabhat.
The ratio decidendi of the judgment of the Supreme Court of India is to be treated as Law. High Court and Supreme Court , as you know, always decide the question of law in any case before it and the facts are considered as contributory factors to the question of law involving determination. Therefore, any particular question of law decided by the higher judiciary is not merely case-specific but equally applies to similar cases as a precedent.

Moreover, the PG Act,1972 being a Central Legislation cannot have different interpretations according to the requirements of any individual or establishment.

Thanks Umakanthanji,
Seeing your valid comments over the issues. In our legal system for the single cause of case having several judgements in favour and against. The bright example is present EPS95 pension matters.

To pay Gratuity company need to register or any employee who completes continue 5 yrs of his service. he/she will be entitle for Gratuity. can any plz clarify

There is no need to get any separate registration but once an employee becomes eligible to get gratuity by means of his length of service he becomes entitled to get it automatically on separation from the company.