Gratuity is applicable if employee has worked 4 years and 334 days but not 5 years

Hello,

I need advice regarding payment of gratuity for the employees who have resigned from my company.

The cases are as follows:

1. One of my employees resigned after completing 4 years and 11 months of service with this company, resulting in a total of 4 years and 334 days of work.
2. Another employee resigned after completing 4 years and 218 days of service with the company.

In my understanding, gratuity is applicable if an employee has completed 4 years and 240 days of service with the company, as mentioned in Section 2 regarding continuous service. Therefore, the second employee is not eligible for gratuity, while the first one is eligible as his 5 years of service can be considered in his case.

I need your expert advice in this regard. Is gratuity payable to them as per the Gratuity Act?

Thank you,
Foramkumar Patel

Dear Patel,

Your presumption that the employee who worked for 4 years and 11 months is eligible to receive gratuity under the Payment of Gratuity Act, 1972, whereas the employee with less than 240 days of service in the fifth year is not eligible, is correct in view of the Madras High Court's judgment in the Mettur Beardsel case.

Dear Mr. Patel,

The act states that one is eligible for gratuity upon completion of 5 years of service. To date, there have been no substantial changes made to the act on this subject, except for some decisions from different High Courts (HC's). These verdicts serve as directives for specific cases only. Nowhere have the HC's directed the appropriate government to amend the act or publish notifications regarding the stated conditions.

However, your establishment is free to consider the aforementioned grounds. No one would prevent or raise objections, except perhaps from within your organization, if you were to pay gratuity to an employee who has worked for 4 years and 11 months or 334 days.

Please let me know if you need any further assistance.

Best regards,

[Your Name]

Mr. Patel,

Gratuity is, as you rightly stated, and our esteemed members also affirmed, payable on completion of 4 years and 240 days minimum. This period includes sanctioned leaves, any break in service not attributable to any fault of the workman, or any holidays. The Mettur breadsell case is the best reference when there is a question about entitlement. I am attaching the judgment for your convenience.

So, yes, in your case, the person who has put in 4 years and 11 months of service is entitled to gratuity, while the other one is not.

Dear Patel,

Greetings for the day,

As the definitions of continuous service in the Industrial Disputes Act and the Payment of Gratuity Act are synonymous, the same principle can be adopted under the acts. 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). That is, completion of 4 years + 240 days in the 5th year of service is required for the payment of gratuity.

Thanks & Regards,

Sumit Kumar Saxena

Hi,

Greetings of the day. I was working in a bank (for third-party payroll) that operates for 5 days a week and recently resigned. I have completed more than 4 years and 190 days without any break in services. As per the Act I downloaded from Gov.in, which states that an employee who works for more than 190 days in his last year of service can be considered for Gratuity. Now, my HR is denying the claim, stating that only a person who works in a mine is eligible for the said act of 4 years and 190 days, and the banking field is not considered under the same. Kindly confirm whether I am eligible or not.

I need a little clarification on the following if someone can help me out, which is as below: 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 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 an employee employed below the ground in a mine or in an establishment that works for less than six days a week; and
(ii) two hundred and forty days, in any other case.