Hi,
I joined an organization in Bangalore (Karnataka) on 5th November 2018 as a contract hire/consultant for 3 months. After around 2 months, they offered me an employee position, and I started as an employee on 1st January 2019. I recently resigned from the company a few days ago (15th November 2023), and my last working day is likely to be 31st October 2023. Will I be eligible for gratuity? Here are more details:
A) My company is located in Bangalore (Karnataka).
B) I work in a software company, and we have a 5-day work week.
C) For the contract hire, the offer was from 5th November 2018 to 4th February 2019, and they offered me an employee position from 1st January 2019 without waiting for the contract hire to expire.
D) As an employee, I have been working from 1st January 2019 until now, and I have just resigned. My anticipated last working day will be 31st October 2023.
My queries are as follows:
1. Will I be eligible for gratuity? If I consider 31st October 2023 as my last working day and disregard my contract hire period starting from 5th November, then from 1st January 2019 to 31st October 2023, I would have worked for 4 years and 304 days.
2. Many refer to the Madras High Court ruling of 240 days. Does this ruling apply in Karnataka as well? Has the Supreme Court also made a similar statement? Can I find any legal precedent applicable to Karnataka where an individual was granted gratuity based on the 240-day criterion?
3. What are my options if they outright reject my gratuity claim by stating that I haven't completed 5 years?
Thanks,
Sujit
From India, Pune
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I joined an organization in Bangalore (Karnataka) on 5th November 2018 as a contract hire/consultant for 3 months. After around 2 months, they offered me an employee position, and I started as an employee on 1st January 2019. I recently resigned from the company a few days ago (15th November 2023), and my last working day is likely to be 31st October 2023. Will I be eligible for gratuity? Here are more details:
A) My company is located in Bangalore (Karnataka).
B) I work in a software company, and we have a 5-day work week.
C) For the contract hire, the offer was from 5th November 2018 to 4th February 2019, and they offered me an employee position from 1st January 2019 without waiting for the contract hire to expire.
D) As an employee, I have been working from 1st January 2019 until now, and I have just resigned. My anticipated last working day will be 31st October 2023.
My queries are as follows:
1. Will I be eligible for gratuity? If I consider 31st October 2023 as my last working day and disregard my contract hire period starting from 5th November, then from 1st January 2019 to 31st October 2023, I would have worked for 4 years and 304 days.
2. Many refer to the Madras High Court ruling of 240 days. Does this ruling apply in Karnataka as well? Has the Supreme Court also made a similar statement? Can I find any legal precedent applicable to Karnataka where an individual was granted gratuity based on the 240-day criterion?
3. What are my options if they outright reject my gratuity claim by stating that I haven't completed 5 years?
Thanks,
Sujit
From India, Pune
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If your employer strictly follows the Payment of Gratuity Act, you will fall short of a few days, say four days, if you get relieved on 31st October. This is based on your actual joining on 5th November and ignoring that your services were regularized wef 1st Jan 2019.
There are no Supreme Court rulings which say that 240 days in the fifth year would constitute one year of service, though there are two High Court verdicts from Madras and Kerala. Both these verdicts have interpreted the continuous service to mean 240 days, even though the Act is very specific that completion of five years is mandatory for eligibility for gratuity, of which each year should have at least 240 days if working above the ground or organizations following a six-day working week, and 190 days for those working below the ground of a mine and those following a five-day week. These 240/190 days are immaterial for employees who are monthly paid, which shall include paid weekly offs.
If your employer is convinced that the dictum of the verdicts shall apply to Karnataka also, then they will release your gratuity. If they say that the Act cannot be interpreted in the same way in which the Kerala and Madras High Courts have interpreted, you will have to question it legally. It is up to you to decide.
If you "have 'just' resigned from the company a few days back (15 Nov 2023)," then just forget it and join the new company.
From India, Kannur
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4767There are no Supreme Court rulings which say that 240 days in the fifth year would constitute one year of service, though there are two High Court verdicts from Madras and Kerala. Both these verdicts have interpreted the continuous service to mean 240 days, even though the Act is very specific that completion of five years is mandatory for eligibility for gratuity, of which each year should have at least 240 days if working above the ground or organizations following a six-day working week, and 190 days for those working below the ground of a mine and those following a five-day week. These 240/190 days are immaterial for employees who are monthly paid, which shall include paid weekly offs.
If your employer is convinced that the dictum of the verdicts shall apply to Karnataka also, then they will release your gratuity. If they say that the Act cannot be interpreted in the same way in which the Kerala and Madras High Courts have interpreted, you will have to question it legally. It is up to you to decide.
If you "have 'just' resigned from the company a few days back (15 Nov 2023)," then just forget it and join the new company.
From India, Kannur
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Hi Madhu,
Thanks for the information. It looks like you are suggesting that I would have to forfeit my gratuity, which I would not like as the amount is significant. You may be aware that in the software industry, this gratuity amount was being deducted every month and was part of my CTC.
I have contacted a few lawyers, and they have clearly informed me that 240 days are what stand as of now. They mentioned that if the organization denies it, I can file an appeal with the Labor Commissioner.
Considering your experience in HR, do you know of any cases in Karnataka/Bangalore where an employee received gratuity when the period of service was less than 5 years but more than 4 years and 240 days? If so, did they receive it after filing a case?
I have found some links related to this topic (there are many, but I am sharing just a few). I understand that the Supreme Court ruling applies to all of India, while High Court rulings are specific to states. However, every state respects the judgments of other states' High Courts. I am curious why such a case has not reached the Karnataka High Court. Do you know of any?
- https://www.linkedin.com/pulse/employee-benefits-india-payment-gratuity-what-himachali-gphr/
- https://www.linkedin.com/pulse/gratuity-required-complete-5-years-continuous-service-rahul-kumar/
I downloaded a PDF of the Gratuity Act, and I noticed the mention of "two hundred and forty days":
- https://clc.gov.in/clc/sites/default/files/PaymentofGratuityAct.pdf
Thanks,
Sujit
From India, Pune
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Thanks for the information. It looks like you are suggesting that I would have to forfeit my gratuity, which I would not like as the amount is significant. You may be aware that in the software industry, this gratuity amount was being deducted every month and was part of my CTC.
I have contacted a few lawyers, and they have clearly informed me that 240 days are what stand as of now. They mentioned that if the organization denies it, I can file an appeal with the Labor Commissioner.
Considering your experience in HR, do you know of any cases in Karnataka/Bangalore where an employee received gratuity when the period of service was less than 5 years but more than 4 years and 240 days? If so, did they receive it after filing a case?
I have found some links related to this topic (there are many, but I am sharing just a few). I understand that the Supreme Court ruling applies to all of India, while High Court rulings are specific to states. However, every state respects the judgments of other states' High Courts. I am curious why such a case has not reached the Karnataka High Court. Do you know of any?
- https://www.linkedin.com/pulse/employee-benefits-india-payment-gratuity-what-himachali-gphr/
- https://www.linkedin.com/pulse/gratuity-required-complete-5-years-continuous-service-rahul-kumar/
I downloaded a PDF of the Gratuity Act, and I noticed the mention of "two hundred and forty days":
- https://clc.gov.in/clc/sites/default/files/PaymentofGratuityAct.pdf
Thanks,
Sujit
From India, Pune
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I know that IT professionals receive a substantial salary, but the gratuity qualifying salary would be the least! I also know that no IT company would deduct the gratuity from the salary every month, yet it shall be marked as part of CTC. CTC has no legal sanctity, and it shall include any amount which the company may incur by employing you. Therefore, it shall encompass future costs. The offer letter will have a condition for such payments, like, for gratuity, it shall be "payable as per law in force." If the law states you can receive it for your service in less than 5 years, you can get it, and if the law is amended to make it payable after ten years, you will lose it.
Now, regarding the companies that have offered gratuity to employees who have worked for less than five years, I would say that such companies have considered only the basic salary for the calculation of gratuity. Many IT companies and also companies where collective bargaining is not present, or at least in respect of employees who do not have their salary revised in a settlement with bargaining agents, trade unions, have a salary structure with the least amount as basic salary and very substantial amounts in 'other allowances' to circumvent the law, which states that 'allowances' do not qualify for gratuity. Though there are different views about the treatment of allowances, the general tendency is to consider basic salary and dearness allowance alone. Unfortunately, these new-generation companies do not pay dearness allowance but end up calculating the gratuity on the basic salary, which they fix as a component of total remuneration, i.e., salary.
As observed by you, the verdicts of Hon. High Courts need not be followed, unlike a Supreme Court verdict. Still, the Labour Commissioner (the controlling authority for the payment of Gratuity, which need not necessarily be the Labour Commissioner but an Asst. Labour Commissioner) can refer to these High Court judgments and make a finding of his own based on the situation.
Now, my recommendation to leave the issue is just practical. If you want to fight for it, you can file a complaint before the controlling authority. If your company has offices in other states, then the Asst. Labour Commissioner (Central) is the appropriate authority, whereas if you have an office only in Karnataka, then the Officer of the State Labour Department is the authority. Before filing a complaint, please send a letter to the employer (in form I).
You may calculate the gratuity based on the basic salary that you receive now. As already pointed out, it is a question of law whether the amount of gratuity is to be calculated on the basic salary alone or on the gross salary. Anyway, I am of the opinion that it should be on the gross salary, which is considered for the deduction of loss of pay when an employee takes leave without pay. (I cannot elaborate much because I am fighting a case on the same, and the proceedings are in the evidence stage only. Sorry for that!)
Madhu T K
From India, Kannur
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Now, regarding the companies that have offered gratuity to employees who have worked for less than five years, I would say that such companies have considered only the basic salary for the calculation of gratuity. Many IT companies and also companies where collective bargaining is not present, or at least in respect of employees who do not have their salary revised in a settlement with bargaining agents, trade unions, have a salary structure with the least amount as basic salary and very substantial amounts in 'other allowances' to circumvent the law, which states that 'allowances' do not qualify for gratuity. Though there are different views about the treatment of allowances, the general tendency is to consider basic salary and dearness allowance alone. Unfortunately, these new-generation companies do not pay dearness allowance but end up calculating the gratuity on the basic salary, which they fix as a component of total remuneration, i.e., salary.
As observed by you, the verdicts of Hon. High Courts need not be followed, unlike a Supreme Court verdict. Still, the Labour Commissioner (the controlling authority for the payment of Gratuity, which need not necessarily be the Labour Commissioner but an Asst. Labour Commissioner) can refer to these High Court judgments and make a finding of his own based on the situation.
Now, my recommendation to leave the issue is just practical. If you want to fight for it, you can file a complaint before the controlling authority. If your company has offices in other states, then the Asst. Labour Commissioner (Central) is the appropriate authority, whereas if you have an office only in Karnataka, then the Officer of the State Labour Department is the authority. Before filing a complaint, please send a letter to the employer (in form I).
You may calculate the gratuity based on the basic salary that you receive now. As already pointed out, it is a question of law whether the amount of gratuity is to be calculated on the basic salary alone or on the gross salary. Anyway, I am of the opinion that it should be on the gross salary, which is considered for the deduction of loss of pay when an employee takes leave without pay. (I cannot elaborate much because I am fighting a case on the same, and the proceedings are in the evidence stage only. Sorry for that!)
Madhu T K
From India, Kannur
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Dear Mr. Sujit,
Though Mr. Madhu T.K. has explained in detail about the Gratuity Act and its applicability, I would like to add a few points which may be helpful:
1. The concept of 240 days (which you have mentioned regarding the Gratuity Act) is related to counting that year as a full year (uninterrupted service). That means if the employees work for 240 days till the end of the year, then only that year will be counted as one year. However, as per the Act, that is applicable only when the circle of 365 days is completed in the year (period). That doesn’t mean only after completing 240 days it will be treated as one year.
2. It is true that in various cases, gratuity is allowed by courts (even the Labour Office also denotes the verdicts in their hearings). But the Act has not been amended so far, so as per the Gratuity Act, there should be five years of uninterrupted service. No such decision has been given by the Supreme Court.
3. As suggested by Mr. Madhu, you can also fight for your emoluments in which the said references can be produced as valid document/s.
Thank you.
From India, Delhi
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Though Mr. Madhu T.K. has explained in detail about the Gratuity Act and its applicability, I would like to add a few points which may be helpful:
1. The concept of 240 days (which you have mentioned regarding the Gratuity Act) is related to counting that year as a full year (uninterrupted service). That means if the employees work for 240 days till the end of the year, then only that year will be counted as one year. However, as per the Act, that is applicable only when the circle of 365 days is completed in the year (period). That doesn’t mean only after completing 240 days it will be treated as one year.
2. It is true that in various cases, gratuity is allowed by courts (even the Labour Office also denotes the verdicts in their hearings). But the Act has not been amended so far, so as per the Gratuity Act, there should be five years of uninterrupted service. No such decision has been given by the Supreme Court.
3. As suggested by Mr. Madhu, you can also fight for your emoluments in which the said references can be produced as valid document/s.
Thank you.
From India, Delhi
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I'm sorry, but the text you provided appears to be in a different language and contains special characters that I cannot interpret for spelling or grammar errors. If you could provide the text in English or let me know the language, I'd be happy to assist you with the corrections. Thank you.
From India, Pune
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From India, Pune
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