Gratuity Eligibility: Does a 45-Day Leave Without Pay Affect Five Years of Service?

Hi! Can someone tell whether an employee will be entitled to gratuity if they have worked uninterrupted for five years but have once availed LWP for about 45 days in the fifth year? Is there any ruling to support this?

Thanks,
Prasoon

Employees are entitled to gratuity. Even in cases of loss of pay, as long as they remain part of our organization, they are eligible for gratuity. The only exception is when an employee rejoins the organization; in that case, they are no longer entitled to gratuity.

In normal circumstances, a person is presumed to have continuous service if he has worked for 240 days in a year of 12 months. However, with a view to avoiding denial of gratuity to an employee who has eligible service of 5 years but has not worked for 240 days in any particular year intervening the period of 5 years, a separate ruling is in place. Accordingly, one who has worked for at least 190 days in a year and for the absence (leave without pay) without the issuance of a notice or warning letter to the employee will be deemed as having continuous service.

Therefore, if in the year in which he had taken leave without pay for 45 days, he had actually worked for at least 190 days and no notice for the leave without pay has been served on him by the employer asking him to explain why action should not be taken against him, then the year will be counted as a service year for the calculation of gratuity.

Regards,
Madhu.T.K

Thanks, Madhu. It was a sanctioned leave without any notice or penalty. In case of denial, do we as HR professionals have any judgment or ruling supporting this?

Thanks again,
Prasoon

Dear,

It is defined in the act itself. If in a particular year someone has taken unauthorized leave and some punishment is given to him, and the total number of working days comes to less than 240, then only you can think about the forfeiture of gratuity.

Thank you.
J. S. Malik

It's simple calculation:

240 x 4 = 960
240 - 45 = 195
240 x 5 = 1200
960 + 195 = 1155

Even the eligibility for gratuity is 4.8 years of continuous service, i.e., 4.8 x 240 = 1152. No issue, go ahead.

Dear Prasoon,


The Supreme Court had held in Lalappa Lingappa Vs Lakshmi Vishnu Textile Mills, Sholapur, that in terms of definition of “continuous service” in section 2 (c) of the Payment of Gratuity Act, employees who remained absent without pay and had actually worked for less than 240 days were denied gratuity. Since the enforcement of this rule resulted in denial of gratuity to a number of employees whose short term absence remained unregularised it was proposed to amplify the definition of continuous service to provide

(a)that an employee working in an establishment which works for less than six days in a week and who is not in uninterrupted service for one year, shall be deemed to be in continuous service for a period of one year if he has actually worked for 190 days in the preceding year, and
(b)that for determining the continuous period of six months for the purpose of payment of gratuity, an employee should have completed half the number of days of actual work which constitute “continuous service” for a whole year.

Regards,

Madhu.T.K

Sir,
i am working from 6 years in PSU organization, as my capacity office manager, So i would like to know that i am eligibile for graruity

If your Public Sector Unit has any gratuity scheme better than the one given in the Payment of Gratuity Act, the rules stated in your standing orders about such a gratuity scheme will apply. Otherwise, you are eligible for gratuity. There is no salary ceiling for eligibility for gratuity, but the maximum gratuity payable to an employee is limited to Rs 3.5 Lakhs.

Regards,
Madhu.T.K

My wife worked in an MNC as a Tech Support Executive from February 2, 2004, until September 5, 2008, which totals 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. Is she eligible for gratuity?

According to my calculation:

The total days from 02/02/2004 to 05/09/2008 is 1645 days. The total number of off days (2 off days per week) during the working period is 468, so 1645 - 468 = 1177 days worked.

I have come across a comment stating that even if you have worked for 4.8 years, you are still eligible for gratuity:

"By mnjTiwari Re: Payment of Gratuity It's a simple calculation: 240x4=960 240-45=195 240x5=1200 960+195=1155 Even the eligibility for gratuity is 4.8 years of continuous service, i.e., 4.8x240=1152 No issue, go ahead"

Is she eligible for gratuity? If so, how do we proceed with it? Please help.