For example, we have employees on a 1-year contract. If someone leaves after completing 240 days but before the completion date of their contract, do I need to pay gratuity?
If I terminate someone for long absenteeism, etc., after 240 days but before the completion of the contract period, do I need to pay gratuity?
From India, Mokameh
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2If I terminate someone for long absenteeism, etc., after 240 days but before the completion of the contract period, do I need to pay gratuity?
From India, Mokameh
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Dear Pritesh-Patel1,
First of all, the question of payment of gratuity arises only after an employee has completed 5 years of continuous service in the same establishment as per the provisions of the Payment of Gratuity Act. Therefore, you need not pay gratuity to an employee who is on a one-year contract, irrespective of whether he has completed one year of the contract or not.
Panchsen
P. Senthilkumar
IR Consultant
senprithvib6@gmail.com
9884009193
From India, Chennai
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First of all, the question of payment of gratuity arises only after an employee has completed 5 years of continuous service in the same establishment as per the provisions of the Payment of Gratuity Act. Therefore, you need not pay gratuity to an employee who is on a one-year contract, irrespective of whether he has completed one year of the contract or not.
Panchsen
P. Senthilkumar
IR Consultant
senprithvib6@gmail.com
9884009193
From India, Chennai
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Dear PSenthil,
I appreciate your prompt reply. This is regarding the 2018 amendment in the standing order and subsequent circular. I am attaching the link for clarification: [Business Standard Article](https://www.business-standard.com/article/economy-policy/fixed-term-contract-staff-to-get-gratuity-benefits-like-permanent-employees-118032200976_1.html#:~:text=In%20a%20first%2C%20wo rkers%20hired,time%20of%20leaving%20the%20job.& ;amp;text=Under%20the%20Gratuity%20Act%20of,when%2 0they%20leave%20the%20organisation).
Thank you.
From India, Mokameh
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I appreciate your prompt reply. This is regarding the 2018 amendment in the standing order and subsequent circular. I am attaching the link for clarification: [Business Standard Article](https://www.business-standard.com/article/economy-policy/fixed-term-contract-staff-to-get-gratuity-benefits-like-permanent-employees-118032200976_1.html#:~:text=In%20a%20first%2C%20wo rkers%20hired,time%20of%20leaving%20the%20job.& ;amp;text=Under%20the%20Gratuity%20Act%20of,when%2 0they%20leave%20the%20organisation).
Thank you.
From India, Mokameh
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Dear Prithesh,
As per the 2018 amendment, it clearly states that gratuity is only applicable after completion of 5 years of tenure of service in the same organization, regardless of whether the employment is permanent or under a contract. It is evident that the individual must complete a total of 4 years and 240 days of service within the same organization to become eligible for gratuity.
Individuals are not eligible for gratuity after completing 4.5 years. However, according to a ruling by the Madras High Court, individuals who have completed 240 days in their fifth year of service are entitled to gratuity. Furthermore, the legal heir of an employee is eligible for gratuity if the employee passes away during employment.
From India, Tiruchi
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As per the 2018 amendment, it clearly states that gratuity is only applicable after completion of 5 years of tenure of service in the same organization, regardless of whether the employment is permanent or under a contract. It is evident that the individual must complete a total of 4 years and 240 days of service within the same organization to become eligible for gratuity.
Individuals are not eligible for gratuity after completing 4.5 years. However, according to a ruling by the Madras High Court, individuals who have completed 240 days in their fifth year of service are entitled to gratuity. Furthermore, the legal heir of an employee is eligible for gratuity if the employee passes away during employment.
From India, Tiruchi
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Dear Hariharan,
I would like to request you to go through the link posted in my reply above. The 2018 amendment in the Standing Order states, and I quote verbatim: "He shall be eligible for all statutory benefits available to a permanent workman proportionately according to the period of service rendered by him even if his period of employment does not extend to the qualifying period of employment required in the statute."
This means that Fixed-Term Contract (FTC) employees are now eligible for gratuity even before completing 5 years of service. My query pertains to the treatment of gratuity if an FTC employee leaves before the contract completion date but has completed 240 days in that year.
Thank you.
From India, Mokameh
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I would like to request you to go through the link posted in my reply above. The 2018 amendment in the Standing Order states, and I quote verbatim: "He shall be eligible for all statutory benefits available to a permanent workman proportionately according to the period of service rendered by him even if his period of employment does not extend to the qualifying period of employment required in the statute."
This means that Fixed-Term Contract (FTC) employees are now eligible for gratuity even before completing 5 years of service. My query pertains to the treatment of gratuity if an FTC employee leaves before the contract completion date but has completed 240 days in that year.
Thank you.
From India, Mokameh
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Dear Pritesh-Patel,
Where is it written about gratuity in the said Notification? The said notification is amending Central Rules under the IE (SO) Act. The quote you gave verbatim is for statutory benefits available under the IE (SO) Act and not under the Payment of Gratuity Act.
The Payment of Gratuity Act is an independent piece of legislation which is not amended. According to it, one has to complete not less than 5 years of continuous service, except in the jurisdiction of HC at Chennai and Kerala, where POG is applicable on 4 years and 240 days in the fifth year.
From India, Mumbai
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Where is it written about gratuity in the said Notification? The said notification is amending Central Rules under the IE (SO) Act. The quote you gave verbatim is for statutory benefits available under the IE (SO) Act and not under the Payment of Gratuity Act.
The Payment of Gratuity Act is an independent piece of legislation which is not amended. According to it, one has to complete not less than 5 years of continuous service, except in the jurisdiction of HC at Chennai and Kerala, where POG is applicable on 4 years and 240 days in the fifth year.
From India, Mumbai
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Dear Bhartiya Akhil, Appreciate your view. Thanks for the clarity
From India, Mokameh
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From India, Mokameh
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