24 March 2020
Clarity between gratuity eligibility service (5 or 4.8 yrs)? The gratuity eligibility service as per Gratuity Act 1972 is 5 years but as per the judgment from Supreme Court below and the quotation from the book quoted below it seems that the gratuity eligibility service is 4 years 240 days.
"Judgment from Supreme Court: "Yes, by virtue of the judgment of Supreme Court rendered under the provisions of the Industrial Dispute Act in Surendra Kumar Verma vs. Central Govt. Industrial Tribunal,[(1980) (4) S.C.C.433)], it is enough that an employee has a service of 240 days in the preceding 12 months and it is not necessary that he should have completed one whole year’s service.
As the definition of continuous service in Industrial Dispute Act and Payment of Gratuity Act are synonymous, the same principal can be adopted under the act also and hence an employee rendering service of 4 year 10 months 11 days is considered to have completed 5 years continuous service under sec.4(2) and thereby is eligible for gratuity.
" Quotation from the book: Law Book (Bare Act,2004).1. 4 years and 6 months (190 days = 1 year) where the company follows 5 day a week. 2. 4 years and 8 months ( 240 days = 1 year) where the company follows 5 day a week is eligible for gratuity.
The payment of gratuity ( second amendment) act, 1984 clarifies this. One needs to calculate the no of years and service completion as follows:
A company which follows 5 day week Date of Joining: 1.05.2000 -
01.05.2000 to 30.04.2001 - worked for 190 days 01.05.2001 to 30.04.2002 - worked for 190 days
If we go by the above formula and if the person does not have any break in service he will be eligible for gratuity on 01.11.2004 " Non clarity of this rule has created confusion among a lot of employees. As some hear that some companies are following the 4 years 240 days rule, while some follow the 5 year rule.
If the Rule of 4 years & 240 days is followed then you are entitled for the grant of gratuity of 6 years.
25 March 2020
Sir i know i am eligible for gratuity but my question is if i am eligible for 5 yrs or 6 yrs(since i spent 5 years, 5 months and 26 days in organization). As per Mr. Raj i am eligible for 6 yrs if 240 days rule is used but others saying 5 yrs.
25 March 2020
Gratuity in India is calculated using the formula:
Gratuity = Last Drawn Salary × 15/26 × No. of Years of Service
The ratio 15/26 represents 15 days out of 26 working days in a month. Last drawn salary = Basic Salary + Dearness Allowance. Years of Service are rounded down to the nearest full year. For example, if the employee has a total service of 20 years, 10 months and 25 days, 21 years will be factored into the calculation. In the above case, we have taken 21 years as tenure of service because A has worked for more than 6 months in year. Had he worked for 20 years and 5 months, 20 years of service would have been taken into account while calculating the gratuity amount.
Hope the above explanation makes it clear that you may be eligible for 5 years gratuity alone and not for 6 years as you may have incorrectly interpreted the law.
25 March 2020
Sir, as per my understanding 180 days or 240 days rule is for last year (after 5th year), if completed would be counted as full year i.e your service would be counted for 6 years in that case. In present situation ot would be 5 years only.
26 March 2020
If the author feels that he is eligible for gratuity payment for 6 years despite giving him proper explanation, he is at his liberty to fight it out through legal sources. It will be good for him if he gets some benefits by tapping some loopholes of law.
26 March 2020
Dear Author, You have calculated that you have served 181 days (without going in details) in last year of your service. In your post dated 25.03.2020 you have mentioned that your organisation has 5 days a week, in such case 240 days has to be completed after 5 years to be counted for 6 years.