Gratuity Payment in 4 years 8 months

How many years of service do you need to be eligible for Gratuity ?

5 years, isn’t it ?


If you are a software engineer like me or employed in other high-paced jobs, you

would probably give the above answer. Most people think it is 5 CALENDAR 

years ( or 365 * 5 days exact)


But the correct answer is: 


4 years 8 months 

(or 240 days  to be precise for organizations working 6 days a week)

or

4 years 190 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 )


Most software engineers (or professionals employed in other high-paced jobs) have 

very limited knowledge of Gratuity laws – the reason is simple – very few professionals

actually stay for around 5 years in the same job :)


But if you are like me who have managed to stay long in the same company, and more

importantly been on the edge of 5 years of service (I stayed in the same company for

4 years 10 months 7 days), you probably would have gone deeper in to the rules of Gratuity

Act and asked yourself – does losing a few months out of 5 CALENDAR years actually

deprive you of your hard-earned Gratuity (which is, in most cases shown as a part

of your CTC) ?


When I found myself in this situation, I did a thorough research including talking to friends,

seniors, reading HR forums on internet, talking to lawyers and finally – reading the Gratuity Act myself.


What I found was surprising – most people – even professionals in the field – were unaware 

of what the Gratuity Act actually says.

I managed to get an exact copy of the  Gratuity Act  and its attached rules from 


Gratuity Act 

http://labour.nic.in/clc/PaymentofGratuityAct.doc


and


Rules of Payment Of Gratuity

http://labour.gov.in/act/acts/RulesofPaymentOfGratuity.doc



I wanted to share my findings with the rest of the world so that someone in my

position doesn’t have to start from scratch.


My Findings:

The main relevant point in the Act, for the present discussion is the definition of the 

term “completed year of service”  in Section: 2 Definitions

 


Section: 2
Definitions.
(b) “completed year of service” means continuous service for one year;
[2] [(c) "continuous service" means continuous service as defined in section 2A;]


Section 2A itself is defined as below


 

Section: 2A
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….
(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;
 
 

Building on the above definition, the Gratuity Act defines the payment of Gratuity in Section 4

Section: 4

Payment of gratuity.

 

1) Gratuity shall be payable to an employee on the termination of his employment after he 

has rendered continuous service for not less than five years, -(a) on his superannuation, or (b) on his retirement or resignation,  
 

Most people referring the Act only refer to Section 4 and infer that a minimum of 5 years of service is required for Gratuity – but if seen in light of the previous DEFINITIONS of  continuous service it is clear the Act implies  that 4 years and 240 days/190 days (depending on the number of days the organization works in a week) is enough to satisfy the requirement of continuous service for not less than five years, as stated in above Section 4 – Payment of Gratuity


Many companies have started subscribing to the above logic and have started to provide gratuity to employees leaving after 4 years 8 months instead of requiring exact 4 years 12 months of service.


========================================================


Hope you had a good reading !
(my apologies for a long post – but then legal matters are seldom simple :) )


Now its time to post your views on the matter
This is what I have been infer from the Gratuity Act and based on my research from other sources.
What do YOU  think of the requirements for eligibility of Gratuity ?
Does you organization or any organization that you know, allow Gratuity in 4 years 8 months ?
Please share your comments and if possible, spread word about this to your friends and
colleagues. 
You may also post links to other relevant resources in this regard


Thanks
Saket

========================================================

Recent updates on case of Gratuity for 4 years 8 months
I have been actively researching the above Gratuity case and have got additional proofs now which I think will convince the companies of the authenticity of the eligibility of Gratuity for 4 years 8 months

I have come to know of  the judgement in a very recent and high profile case (judgement delivered on 31-03-2011) where an employee with 4 years 8 months 15 days employment was granted gratuity with 10% interest from one of the biggest corporations in India.

The case involves a former employee who filed several cases against his employer after his services were terminated after 4 years 8 months 15 days and was denied Gratuity and many other payments . He has won cases at Consumer Forum for Provident fund refund and Controller of Gratuity for Gratuity cases and is pursuing other cases in the courts.

Some links for the case

http://www.moneycontrol.com/news/ibu_index.php?storyid=397

http://www.dnaindia.com/mumbai/report_court-issues-summons-to-anil-ambani_1283510

http://psomani.lawyersclubindia.com/experts/Payment-og-Gratuity-Act-1972-89476.asp

Will update more information on this case shortly.

Thanks
Saket


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12 responses to “Gratuity Payment in 4 years 8 months

  • Rohit

    Useful post. Thnx.
    Rohit

  • Rupa

    A Good read..I have 4.9 years of experience with CA India(Computer Associates), and was eligible for gratuity as per the law 4 years 240 days including notice period. I got the gratuity amount with full and final settlement within 20 days without any hassle.

    Rupa

    • Tarun Vishwani

      Hi
      I have also completed 4 years 260 days in my organisation and i am currently in notice period.
      Rupa- was your company(CA) aware of such law or you had to notify them? , Was your company putting the gratuity money in LIC or some other trust? , please update me about the same and what all things you did to convince your company.

  • Bhaskar Gogoi

    Thanks with the help/insight of this blog now I will try to get Gratuity from my company which earlier denied giving vague reasons(it is up to the company as to how to implement this policy). I’ve worked 4 years and 355 days. Other companies that i know who gives Gratuity apart from CA are : Akamai, Nokia, Oracle. Will update the results of my efforts

  • Ashutosh

    Hi Saket,
    My company is planning to close down the india teamn for the product I work for. Though I have been an exceptional performer, this move is more so as the company wants to save money and they think my product is not earning much. I have completed 4 yrs 10 months in service. In case they terminate my services, would I still be eligible for gratuity

    • skiitr2003

      Hi Ashutosh, as per my knowledge you should get gratuity
      since you have already completed 4 yrs 10 months. If company terminates your services, it is even more important that the company pays you gratuity since it is not because of your fault that you did not complete 5 years. Please refer to Section 4 in http://labour.nic.in/clc/PaymentofGratuityAct.doc. If needed apply for gratuity as per the steps I have mentioned earlier (See my reply to other comments). – Saket

  • Sangamesh

    Good Reading :)

  • sunny

    Dear friend,
    Thank you so much for the information.

  • Neha

    I joined my present org in June 2006 and if my date of resignation is May 6, 2011. I have to serve a notice period of one month. Am I eligible for gratuity? Is notice period counted in the gratuity act?

    • skiitr2003

      Hi Neha,

      I think yes.Logically, since you are (most likely) still performing your duties as an employee, you
      are very much a part of the organization in the notice period.Even if the company denies such a claim,
      you have completed more than 4 years 8 months by May 2011 – so I think you should be eligible.
      Please read the linked document of Gratuity Act for details

  • Bharti

    Dear Saket,

    Where employees have a one year contract, which may or may not be renewed would provisions of gratuity act still apply to those who work for 4 years and 190 days/240 days for employees whose contract kept getting renewed?

    Please rely soon.

    Bharti

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