LIVE Online Course on NDPS by Riva Pocha and Adv. Taraq Sayed. Starting from 24th May. Register Now!!
LAW Courses

Share on Facebook

Share on Twitter

Share on LinkedIn

Share on Email

Share More

Sidd (Lead)     19 December 2010

Clarity between gratuity eligibility service (5 or 4.8 yrs)?

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 10months 11days 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) i.e. The Payment of Gratuity Act,1972 (Publisher: Law Publishers () Pvt.Ltd. 18A-S.P.Marg,Post Box-1077,Allahabad-211 001. Phone:623735,623741 Fax-0532-622276.website: lawpublishersindia.com

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

Doj 1.05.2000 -

01.05.2000 to 30.04.2001 - worked for 190 days
01.05.2001 to 30.04.2002 - worked for 190days

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. Please help remove this confusion so that nobody rights of gratuity are being compromised on. Expert Lawyer may please give his comments and advice. . 



Learning

 290 Replies

Jayant Pawar (advocate)     19 December 2010

Dear Sidd,

Employee must work for 240 days in continuity of his service in last year. On the day when he completes his 240 days he will be eligible for gratuity. 

Sidd (Lead)     19 December 2010

Thanks Jayant for the clarity.

Can you please let me know the law / section or amendment that I can refer to for this.

This would help me share and communicate the reference with all in need, where we have confusion among 5 years and 4 years 240 days. We need to share the reference of this law, with the companies where the gratuity is still being paid after completion of continuous service of 5 years.

Isaac Gabriel (Advocate)     06 January 2011

An employee who has put in his service for a period of 240 days in fifth year will be deemed to have continued in the service for 1 year.

Mettus Beardsell Ltd., Madrs Vs. RLC(C) 1998 LLR 1072(Mad)

1 Like

Sidd (Lead)     08 January 2011

Thanks for the reply Isaac

Need a couple of clarifications:

1) What if the employee has unapproved leave during his continuous tenure of 4 years and 240 days. Will he have to work for those numbers of extra days in the organization?

For example, If an employee has an unapproved leave of 1 day in his tenure of 4 years and 240 days. Will he have to work for 1 extra day in the organization?

 

2) In the 5th year, employee has rendered continuous service for a period of = 240 days (including notice period served). Is the notice period taken in account while calculating the 240 days?

In the notice period the employee has been serving the company as a regular employee and has been performing all his duties and responsibilities. And he has been receiving his salary as usual for all his duties performed.

 

Request you to please reply these two clarifications. Thanks in advance for your co-operation. Anticipating an early response.

Regards.

Isaac Gabriel (Advocate)     08 January 2011

If the period availed is treated as leave,be it paid or not paid it is counted towards the service period

The notice period service is also counted for his service.

sweet022915 (engineer)     10 January 2011

Hi, I have a query regarding gratuity eligibility.
Before resigning from my previous org, i wrote them a mail asking for gratuity qualification period,they replied back to me 4.6 yrs.
On confirmation from them that my period of stay in the org will be 4yrs 6 months 10 days,i resigned from the same.
Now,after 5 months i have still not got my money from that org.On writing the mail again they told me that in between the period the benchmark for gratuity has been revised upto 4.8 years.
 
I have everything on mail written by HR team, can i sue my previous org for misleading and misinformation?
In case i am eligible for gratuity,to whom shall i approach?
Is it advisable for me to lodge a legal complaint againt my previous employer?
 
Fyi: i resigned on 13-aug-2010 from my previous employer.
waiting for a reply.
Thanks

Isaac Gabriel (Advocate)     10 January 2011

Revised regulations cannot take retrospective effect. File a petition with the Asst.Commissioner of Labour of your area claiming Gratuity.

1 Like

sweet022915 (engineer)     10 January 2011

Thanks for the reply,just one more doubt,the headquarters of my previous employer is in mumbai. So shall i file a petition in Mumbai or in delhi ? Thanks

Isaac Gabriel (Advocate)     10 January 2011

In this case, Employer and Employee falls under the jurisdiction of the Mumbai commissionerate, So it has to be filed at Mumbai.

jain (product)     13 January 2011

please clear us regarding gratuity amenmends. I am leaving the organisation in 4years and 250 days (5 days working). please share your experience, so that same can be share to my organisation. also please let me know how i can go for this after leaving the organisation. My reliving from my current org is end of jan2011

Kirti Kar Tripathi (lawyer)     15 January 2011

 

The case of Surendra Kumar Sharma is based on Section 25B of the Industrial Disputes Act, whereas the present problem relates with Section 2A of the Payment of Gratuity Act. Before answering this problem it is necessary to compare both section as well as the case of Surendra Kumar Sharma. Both the sections of respective Act are being produced as below

Section 2A of payment of Gratuity Act. CONTINUOUS SERVICE. - For the purposes of this Act, - (1) an employee shall be said to be in continuous service for a period if he has, for that period, been in uninterrupted service, including service which may be interrupted on account of sickness, accident, leave, absence from duty without leave (not being absence in respect of which an order treating the absence as break in service has been passed in accordance with the standing order, rules or regulations governing the employees of the establishment), lay off, strike or a lock-out or cessation of work not due to any fault of the employee, whether such uninterrupted or interrupted service was rendered before or after the commencement of this Act.

(2) 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 - (a) 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 which works for less than six days in a week; and (ii) two hundred and forty days, in any other case;

(b) for the said period of six months, if the employee during the period of six calendar months preceding the date with reference to which the calculation is to be made, has actually worked under the employer for not less than - (i) ninety-five days, in the case of an employee employed below the ground in a mine or in an establishment which works for less than six days in a week; and

(ii) one hundred and twenty days, in any other case;

Explanation : For the purpose of clause (2), the number of days on which an employee has actually worked under an employer shall include the days on which - (i) he has been laid-off under an agreement or as permitted by standing orders made under the Industrial Employment (Standing Order's) Act, 1946 (20 of 1946), or under the Industrial Disputes Act, 1947 (14 of 1947), or under any other law applicable to the establishment;

(ii) he has been on leave with full wages, earned in the previous year;

(iii) he has been absent due to temporary disablement caused by accident arising out of and in the course of his employment; and

(iv) in the case of a female, she has been on maternity leave; so, however, that the total period of such maternity leave does not exceed twelve weeks.

(3) where 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 such period if he has actually worked for not less than seventy-five per cent of the number of days on which the establishment was in operation during such period.

 

 

Section 25B of the Industrial disputes Act . Definition of continuous service.- For the purposes of this Chapter,--

(1) a workman shall be said to be in continuous service for a period if he is, for that period, in uninterrupted service, including service which may be interrupted on account of sickness or authorised leave or an accident or a strike which is not illegal, or a lock-out or a cessation of work which is not due to any fault on the part of the workman;

(2) where a workman is not in continuous service within the meaning of clause (1) for a period of one year or six months, he shall be deemed to be in continuous service under an employer--

(a) for a period of one year, if the workman, during a 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 a workman employed below ground in a mine; and

(ii) two hundred and forty days, in any other case;

(b) for a period of six months, if the workman, during a period of six 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) ninety-five days, in the case of a workman employed below ground in a mine; and

(ii) one hundred and twenty days, in any other case.

Explanation.--For the purposes of clause (2), the number of days on which a workman has actually worked under an employer shall include the days on which--

(i) he has been laid-off under an agreement or as permitted by standing orders made under the Industrial Employment
(Standing Orders) Act, 1946 (20 of 1946), or under this Act or under any other law applicable to the industrial establishment;

(ii) he has been on leave with full wages, earned in the previous years;

(iii) he has been absent due to temporary disablement caused by accident arising out of and in the course of his employment; and

(iv) in the case of a female, she has been on maternity leave; so, however, that the total period of such maternity leave does not exceed twelve weeks.]


Since the Surendra Kumar Sharma case has specifically stated that

The difference between old 25-B and present 25-B is patent. The clause "where a workman is not in continuous service .... for a period of one year" with which present S. 25-B(2) so significantly begins, was equally significantly absent from old S. 25-B. Of the same degree of significance was the circumstance that prior to Act 36 of 1964 the expression "Continuous Service" was separately defined by S. 2(eee) as follows:-

"(eee) 'continuous service' means uninterrupted service, and includes service which may be interrupted merely on account of sickness or authorised leave or an accident or a strike which is not illegal, or lock-out or a cessation of work which is not due to any fault on the part of the workman;"

S. 2(eee) was omitted by the same Act 36 of 1964 which recast S. 25-B. S. 25-B as it read prior to Act 36 of 1964, in the light of the then existing S. 2(eee), certainly lent itself to the construction that a workman had to be in the service of the employer for a period of one year and should have worked for not less than 240 days before he could claim to have completed one year's completed service so as to attract the provisions of S. 25-F. That precisely was what was decided by this Court in Sur Enamel and Stamping Works Ltd. v. Their Workmen (supra). The Court said: "On the plain terms of the section (S. 25-F) only a workman who has been in continuous service for not less than

798

one year under an employer is entitled to its benefit. 'Continuous Service' is defined in s. 2(eee) as meaning uninterrupted service, and includes service which may be interrupted merely on account of sickness or authorised leave or an accident or a strike which is not illegal or a lock-out or a cessation of work which is not due to any fault on the part of the workman. What is meant by "one year of continuous service' has been defined in s. 25B. Under this section a workman who during a period of twelve calendar months has actually worked in an industry for not less 240 days shall be deemed to have completed service in the industry.... ... .... The position (therefore) is that during a period of employment for less than 11 calendar months these two persons worked for more than 240 days. In our opinion that would not satisfy the requirement of s. 25B. Before a workman can be considered to have completed one year of continuous service in an industry it must be shown first that he was employed for a period of not less than 12 calendar months and, next that during those 12 calendar months had worked for not less than 240 days. Where, as in the present case, the workmen have not at all been employed for a period of 12 calendar months it becomes unnecessary to examine whether the actual days of work numbered 240 days or more".

Act 36 of 1964 has drastically changed the position. S. 2(eee) has been repealed and S. 25-B(2) now begins with the clause "where a workman is not in continuous service.... for a period of one year". These changes brought about by Act 36 of 1964 appear to be clearly designed to provide that a workman who has actually worked under the employer for not less than 240 days during a period of twelve months shall be deemed to have been in continuous service for a period of one year whether or not he has in fact been in such continuous service for a period of one year. It is enough that he has worked for 240 days in a period of 12 months; it is not necessary that he should have been in the service of the employer for one whole year. So we hold that Usha Kumari and Madhu Bala are in the same position as the other appellants.

In the result all the appeals are allowed and the workmen-appellants are directed to be reinstated with full back wages. We, however, super-impose the condition that the salary on reinstatement of the workmen will be the salary which they were drawing when they were retrenched (subject of course to any revision of scales that might have been made in the meanwhile) and the period from the date of retrenchment to the date of reinstatement will not be taken 799

into account for the purpose of reckoning seniority of the workmen among temporary employees. The respondent is free to deal with its employees, who are temporary, according to the law. There will be no order regarding costs. PATHAK, J.-I entirely agree with may learned brother Chinnappa Reddy in the order proposed by him. The appeals raise strictly limited questions. The appeals by Usha Kumari and Madhubala involve the question whether they can be regarded as being in continuous service for a period of one year within the meaning of s. 25B(2), Industrial Disputes Act, 1947 and if so, to what relief would they be entitled. The remaining appeals require the court to examine whether the appellants should have been awarded reinstatement with back wages instead of the curtailed relief granted by the Industrial Tribunal-cum- Labour Court. That is the entire scope of these appeals. No question arises before us whether the termination of the services of the appellants amounts to "retrenchment" within the meaning of s. 2(oo) of the Act. The respondent Bank of India has apparently accepted the finding of the Industrial Tribunal-cum-Labour Court that the termination amounts to retrenchment. It has not preferred any appeal. I mention this only because I should not be taken to have agreed with the interpretation of s. 2(oo) rendered inSantosh Gupta v. State Bank of Patiala.

Proceeding on the footing mentioned above, my learned brother Chinnappa Reddy has, I say with respect, rightly concluded that on the facts and circumstances before us the appellants should be reinstated with full back wages subject to the proviso that the salary on reinstatement will be the salary drawn by the respective appellants on the date of their retrenchment, qualified by the impact of any revisional scale meanwhile, and subject to the further proviso that the period intervening between the date of retrenchment and the date of reinstatement will be omitted from account in the determination of the seniority of these appellants among temporary employees. Ordinarily, a workman who has been retrenched in contravention of the law is entitled to reinstatement with full back wages and that principle yields only where the justice of the case in the light of the particular facts indicates the desirability of a different relief. It has not been shown to us on behalf of the respondent why the ordinary rule should not be applied. 800

On the other question decided by my learned brother I have no hesitation in agreeing that having regard to the simultaneous amendments introduced in the Industrial Disputes Act, 1947 by Act No. 36 of 1964-the deletion of s. 2(eee) and the substitution of the present s. 25B for the original section-it is no longer necessary for a workman to show that he has been in employment during a preceding period of twelve calendar months in order to qualify within the terms of s. 25B. It is sufficient for the purposes of s. 25B(2) (a) (ii) that he has actually worked for not less than 240 days during the preceding period of 12 calendar months. The law declared by this Court in Sur Enamel and Stamping Works (P) Ltd. v. Their Workmen does not apply to situations governed by the subsequently substituted s. 25B of the Act.

Thus the aforesaid findings of the Hon’ble apex Court was because of omission of  Section "(eee) 'continuous service' means uninterrupted service, and includes service which may be interrupted merely on account of sickness or authorised leave or an accident or a strike which is not illegal, or lock-out or a cessation of work which is not due to any fault on the part of the workman;"

 

In Section 2A of the Payment of Gratuity Act this provision i.e. uninterrupted service, including service which may be interrupted on account of sickness, accident, leave, absence from duty without leave (not being absence in respect of which an order treating the absence as break in service has been passed in accordance with the standing order, rules or regulations governing the employees of the establishment), lay off, strike or a lock-out or cessation of work not due to any fault of the employee, is still existing

Thus I am of the view completion of 12 months colander service is must but the employee is entitled for gratuity in case, he completes 240 days services in preceding 12 calendar months . However, I still I am also in view that position of law is ambiguous in this regard and requires exact interpretation by the Hon’ble Apex   Court.

2 Like

Rama mohan Acharya (Manager HR(Legal))     18 January 2011

I can add that in the case of  Mettus Beardsell Ltd.  Madras Vs. RLC(C) , 1998 LLR 1072(Mad), the Apex court categorically held that An  employee who has put in his service for a period of 240 days in fifth year will be deemed to have continued in service for 1 year and he/she is entitled for gratuity.

lucky (analyst)     29 January 2011

Hi, iam working in IT organization. I joined on 26th september, 2006. Please help me by which date i will be eligible for gratuity including notice period.

Thanks in advance.

Avinash Kumar Sharma (Sr. Manager HR)     30 January 2011

Dear Sir,

I want one more clarity on this matter. Wheather 240 working days or 240 pay days in a year.


Regards,

Avinash


Leave a reply

Your are not logged in . Please login to post replies

Click here to Login / Register  


Start a New Discussion Unreplied Threads



Popular Discussion


view more »




Post a Suggestion for LCI Team
Post a Legal Query