Dear All, Kindly help me understand the eligibility criteria for Gratuity payment.
My doubt is:
A) Is it 5 years of continous service (Plain reading of the Act) or
B) 4.6 years of continous service - computed as 5 years for the purpose of calculation (This is a doubt in my mind) or
C) 4 years and 240 days (As per HC judgement)
I have gone through earlier discussions conducted by learned members of this forum, but still having doubt regarding it's finality.
Kindly help me and I apologise for repeating the same dicsussion.
Thanks in advance to all.
From India, Kollam
3My doubt is:
A) Is it 5 years of continous service (Plain reading of the Act) or
B) 4.6 years of continous service - computed as 5 years for the purpose of calculation (This is a doubt in my mind) or
C) 4 years and 240 days (As per HC judgement)
I have gone through earlier discussions conducted by learned members of this forum, but still having doubt regarding it's finality.
Kindly help me and I apologise for repeating the same dicsussion.
Thanks in advance to all.
From India, Kollam
As per Payment of Gratuity Act, an employee who has completed 5 years of continuous service only is eligible to get gratuity. But when we calculate continuous service, an employee who has worked for 240 days in 12 months only is considered as having continuous service. The Madras High Court and Kerala High Court verdicts in Mettur Bearsell's case and Sreeja's case respectively. have considered the 240 days in the fifth year as one year. But my understanding about the provision in the Act is that it is to decide the continuous service that 240 days shall be considered and not for the eligibility. At the same time, since there exists a court verdict and the dictum of the verdict shall be applied to any similar instances, establishments have started paying gratuity to those who have left service after completing 4 years and 240 days in the fifth year. As 240 days means 240 paid days which will include all paid off days, holidays and leave days, it shall probably require 8 months to get 240 days. Therefore, 6 months in fifth year is undoubtedly out of the scope of gratuity.
From India, Kannur
From India, Kannur
The formula of 4 years + 240 days as eligibility is a judicial interpretation given by the Madras High Court whereas the textual provision in the PGA 1972 is five years. The 240 days of service that would count as Continuous Service for the year is based on Section 2 (2) (a) (ii) of the Act, and is a deeming provision. That means, where there is no continuous service for the full year, then if such discontinuous service is exceeding 240 days in a year then as per law the employee is deemed to be eligible for gratuity for that year. Section 4(1) is clear and categoric that the eligibility is only after 5 years of continuous service, Section 4(2) mandates that gratuity has to be paid for every completed year of service and for such period of service in excess of 6 months there is the eligibility to receive gratuity. The Section 4 (2) is not an exception or does not modify the mandate of Section 4 (1). So read together the 240 days criteria would apply where there is an interrupted service, (that is off and on service) and the six months + service is only for counting the number of years and this is not applicable for eligibility.
From India, Mumbai
From India, Mumbai
Thankyou Dear Madhu Sir and KK!HR for clarifying the doubts. Your explanations will prove very useful. Regards,
From India, Kollam
From India, Kollam
Adv M Munwar,
To your Querrey already Mr. Madhu and Mr KK has given their views, which can be considered according to situation.
But, gratuity is payble after competition of 5 years of services, provided years should be of continuous nature as envisaged in ID Act.
The High Court judgements are case specific but can't be law, unless until notified. One has to consider as per his suitability, to pay or receive.
From India, Mumbai
To your Querrey already Mr. Madhu and Mr KK has given their views, which can be considered according to situation.
But, gratuity is payble after competition of 5 years of services, provided years should be of continuous nature as envisaged in ID Act.
The High Court judgements are case specific but can't be law, unless until notified. One has to consider as per his suitability, to pay or receive.
From India, Mumbai
Dear Prabhat Ranjan Mohanty Sir, Thankyou for giving your views. To conclude my understanding as you have suggested, the court verdicts only applies in similar nature of establishments and instances, and it is upto the employers to take a stand whether gratuity is to be paid or not before 5 years. The default mandatory eligibility period always being 5 years.
Hope I am correct with this understanding.
From India, Kollam
Hope I am correct with this understanding.
From India, Kollam
Yes. But the dictum of a High Court verdict shall be applied to any similar incidents. For example, the Kerala High Court verdict in Sreeja Vs Regional Joint Labour Commissioner [2015 LLR 826] came in 2015. Till then the Labour Officers, the controlling authority under the Payment of Gratuity Act, in Kerala used to take 5 years service as base for entitlement of gratuity. But since the above decision they started considering 4 years and 240 days' service as base. Even now, employers contact me for advise on this matter. But I use to say that the Payment of Gratuity Act says about minimum service of 5 years and 240 days is relevant only to decide whether the service has been continuous or not. I also tell them that there is a court verdict (above referred) which directs payment of gratuity to an employee who has worked for 4 years and 240 days in the fifth year. Final decision should come from the management. If the employee decides to go legal, he can win.
From India, Kannur
From India, Kannur
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Less than 5 years service - Eligibility for payment of gratuity.pdf