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)
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
Rules of Payment Of Gratuity
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.
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
Definitions.(b) “completed year of service” means continuous service for one year;
 [(c) “continuous service” means continuous service as defined in section 2A;]
Section 2A itself is defined as below
For the purposes of this Act, –
accident, leave, absence from duty without leave….
(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
Payment of gratuity.
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
You may also post links to other relevant resources in this regard
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
Will update more information on this case shortly.