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January 24, 2011

Gratuity Payment in 4 years 8 months

By skiitr2003
How many years of service do you need to be eligible for
Gratuity ?
5 years, isnt 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 doesnt 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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This entry was posted on Monday, January 24th, 2011 at 10:25 am and posted in Uncategorized.
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12 Responses to Gratuity Payment in 4 years 8 months

Rohit
January 24th, 2011 at 10:45 am

Useful post. Thnx.

Rohit
 Reply

Rupa
January 24th, 2011 at 12:06 pm

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

Reply

o Tarun Vishwani
February 28th, 2011 at 6:56 am

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.

Reply

Bhaskar Gogoi
February 10th, 2011 at 7:12 am

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). Ive 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

Reply

Ashutosh
February 17th, 2011 at 11:34 am

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

Reply

o skiitr2003
February 18th, 2011 at 12:25 pm

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

Reply

Sangamesh
February 22nd, 2011 at 11:16 am

Good Reading

Reply

sunny
March 9th, 2011 at 11:36 am

Dear friend,
Thank you so much for the information.

Reply

Neha
May 5th, 2011 at 12:04 pm

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?

Reply
 o skiitr2003
June 9th, 2011 at 5:55 pm

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

Reply

Bharti
June 1st, 2011 at 12:29 pm

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

Reply

o skiitr2003
June 9th, 2011 at 6:11 pm

Hi Bharti,

I dont remember any references to any condition of being a permanent employee

to be eligible for gratuity.
But I am sorry I cant be sure about your case.

Please read the documents

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

and
Rules of Payment Of Gratuity
http://labour.gov.in/act/acts/RulesofPaymentOfGratuity.doc

to see if you can find any details favoring your case

and consult a good lawyer if required