hi
I want to get clarfcation on what's definition of the 5th year to be eligibile for grauity. Is it completion of 240 working days.
I am planning to resign 15 days short of my 5th year, however will serve notice period of 30 days, hence by the time I will level, would have served 5 years 15 days...I assme I am covered...Is this correct?
do we have any case law on this subject. pls help
Thanks
Sandy
From India, Ahmadabad
I want to get clarfcation on what's definition of the 5th year to be eligibile for grauity. Is it completion of 240 working days.
I am planning to resign 15 days short of my 5th year, however will serve notice period of 30 days, hence by the time I will level, would have served 5 years 15 days...I assme I am covered...Is this correct?
do we have any case law on this subject. pls help
Thanks
Sandy
From India, Ahmadabad
Hi
Sandy
Gratuity is a lump sum payment to employee when he retires or leaves service. It is basically a retirement benefit to an employee so that he can live life comfortably after retirement. However, under Gratuity Act, gratuity is payable even to an employee who resigns after completing at least 5 years of service.
Gratuity is reward for good, efficient and faithful service rendered for a considerable period.
Employees eligible for gratuity – ’Employee’ means any person (other than apprentice) employed on wages in any establishment, factory, mine, oilfield, plantation, port, railway company or shop, to do any skilled, semi-skilled or unskilled, manual, supervisory, technical or clerical work, whether terms of such employment are express or implied, and whether such person is employed in a managerial or administrative capacity. However, it does not include any Central/State Government employee. [section 2(e)]. Thus, the Act is applicable to all employees - workers as well as persons employed in administrative and managerial capacity.
Gratuity is payable to a person on (a) resignation (b) termination on account of death or disablement due to accident or disease (c) retirement (d) death. Normally, gratuity is payable only after an employee completes five years of continuous service. In case of death and disablement, the condition of minimum 5 years’ service is not applicable. [section 4(1)].
The Act is applicable to all employees, irrespective of the salary.
Amount of gratuity payable - Gratuity is payable @ 15 days wages for every year of completed service. In the last year of service, if the employee has completed more than 6 months, it will be treated as full year for purpose of gratuity. - - In case of seasonal establishment, gratuity is payable @ 7 days wages for each season. [section 4(2)].
Wages shall consist of basic plus D.A, as per last drawn salary. However, allowances like bonus, commission, HRA, overtime etc. are not to be considered for calculations. [section 2(s)].
In case of employees paid on monthly wages basis, per day wages should be calculated by dividing monthly salary by 26 days to arrive at daily wages e.g. if last drawn salary of a person (basic plus DA) is Rs. 2,600 per month, his salary per day will be Rs. 100 (2,600 divided by 100). Thus, the employee is entitled to get Rs. 1,500 [15 days multiplied by Rs. 100 daily salary] for every year of completed service. If he has completed 30 years of service, he is entitled to get gratuity of Rs. 45,000 (Rs. 1,500 multiplied by 30). Maximum gratuity payable under the Act is Rs. 3.50 lakhs (the ceiling was Rs. 1,00,000 which was increased to 2.50 lakhs on 24.9.97 by an ordinance which was later increased to Rs 3.50 lakhs while converting the ordinance into Act].
Maximum gratuity payable – Maximum gratuity payable is Rs 3.50 lakhs. [Section 4(3)]. [Of course, employer can pay more. Employee has also right to get more if obtainable under an award or contract with employer, as made clear in section 4(5)].
Income-Tax exemption - Gratuity received upto Rs. 3.50 lakhs is exempt from Income Tax. Gratuity paid above that limit is taxable. [section 10(10) of Income Tax Act]. - - However, employee can claim relief u/s 89 in respect of the excess amount.
No Compulsory insurance of gratuity liability – Section 4A provides that every employer must obtain insurance of his gratuity liability with LIC or any other insurer. However, Government companies need not obtain such insurance. If an employee is already member of gratuity fund established by an employer, he has option to continue that arrangement. If an employer employing more than 500 persons establishes an approved gratuity fund, he need not obtain insurance for gratuity liability. - - However, this section has not yet been brought into force. Hence, presently, such compulsory insurance is not necessary.
So don't plan to resign before five years of completion otherwise u will loose your gratuity.
why I am saying so.
your statement "I am planning to resign 15 days short of my 5th year (not completed five year), however will serve notice period of 30 days, hence by the time I will level, would have served 5 years 15 days...
(Now think of situation when your employer accept your resignation on same day.
But if you have mentioned date of leaving while giving resignation and ask them the relieve on such a date which is after five years of service then its is ok.
otherwise it wont work even if you have mentioned and your employer accepted your resignation)
your assumption is not practical.
regards
From India, Bahadurgarh
47Sandy
Gratuity is a lump sum payment to employee when he retires or leaves service. It is basically a retirement benefit to an employee so that he can live life comfortably after retirement. However, under Gratuity Act, gratuity is payable even to an employee who resigns after completing at least 5 years of service.
Gratuity is reward for good, efficient and faithful service rendered for a considerable period.
Employees eligible for gratuity – ’Employee’ means any person (other than apprentice) employed on wages in any establishment, factory, mine, oilfield, plantation, port, railway company or shop, to do any skilled, semi-skilled or unskilled, manual, supervisory, technical or clerical work, whether terms of such employment are express or implied, and whether such person is employed in a managerial or administrative capacity. However, it does not include any Central/State Government employee. [section 2(e)]. Thus, the Act is applicable to all employees - workers as well as persons employed in administrative and managerial capacity.
Gratuity is payable to a person on (a) resignation (b) termination on account of death or disablement due to accident or disease (c) retirement (d) death. Normally, gratuity is payable only after an employee completes five years of continuous service. In case of death and disablement, the condition of minimum 5 years’ service is not applicable. [section 4(1)].
The Act is applicable to all employees, irrespective of the salary.
Amount of gratuity payable - Gratuity is payable @ 15 days wages for every year of completed service. In the last year of service, if the employee has completed more than 6 months, it will be treated as full year for purpose of gratuity. - - In case of seasonal establishment, gratuity is payable @ 7 days wages for each season. [section 4(2)].
Wages shall consist of basic plus D.A, as per last drawn salary. However, allowances like bonus, commission, HRA, overtime etc. are not to be considered for calculations. [section 2(s)].
In case of employees paid on monthly wages basis, per day wages should be calculated by dividing monthly salary by 26 days to arrive at daily wages e.g. if last drawn salary of a person (basic plus DA) is Rs. 2,600 per month, his salary per day will be Rs. 100 (2,600 divided by 100). Thus, the employee is entitled to get Rs. 1,500 [15 days multiplied by Rs. 100 daily salary] for every year of completed service. If he has completed 30 years of service, he is entitled to get gratuity of Rs. 45,000 (Rs. 1,500 multiplied by 30). Maximum gratuity payable under the Act is Rs. 3.50 lakhs (the ceiling was Rs. 1,00,000 which was increased to 2.50 lakhs on 24.9.97 by an ordinance which was later increased to Rs 3.50 lakhs while converting the ordinance into Act].
Maximum gratuity payable – Maximum gratuity payable is Rs 3.50 lakhs. [Section 4(3)]. [Of course, employer can pay more. Employee has also right to get more if obtainable under an award or contract with employer, as made clear in section 4(5)].
Income-Tax exemption - Gratuity received upto Rs. 3.50 lakhs is exempt from Income Tax. Gratuity paid above that limit is taxable. [section 10(10) of Income Tax Act]. - - However, employee can claim relief u/s 89 in respect of the excess amount.
No Compulsory insurance of gratuity liability – Section 4A provides that every employer must obtain insurance of his gratuity liability with LIC or any other insurer. However, Government companies need not obtain such insurance. If an employee is already member of gratuity fund established by an employer, he has option to continue that arrangement. If an employer employing more than 500 persons establishes an approved gratuity fund, he need not obtain insurance for gratuity liability. - - However, this section has not yet been brought into force. Hence, presently, such compulsory insurance is not necessary.
So don't plan to resign before five years of completion otherwise u will loose your gratuity.
why I am saying so.
your statement "I am planning to resign 15 days short of my 5th year (not completed five year), however will serve notice period of 30 days, hence by the time I will level, would have served 5 years 15 days...
(Now think of situation when your employer accept your resignation on same day.
But if you have mentioned date of leaving while giving resignation and ask them the relieve on such a date which is after five years of service then its is ok.
otherwise it wont work even if you have mentioned and your employer accepted your resignation)
your assumption is not practical.
regards
From India, Bahadurgarh
"Amount of gratuity payable - Gratuity is payable @ 15 days wages for every year of completed service. In the last year of service, if the employee has completed more than 6 months, it will be treated as full year for purpose of gratuity. - - In case of seasonal establishment, gratuity is payable @ 7 days wages for each season. [section 4(2)]."
Hi,
If I am not wrong, while calcualting the gratuity, more that 4yr. 6month is taken into consideration for eligibility................
Plz clear this
Sashmita
From India, Delhi
Hi,
If I am not wrong, while calcualting the gratuity, more that 4yr. 6month is taken into consideration for eligibility................
Plz clear this
Sashmita
From India, Delhi
Dear Sashmita,
Mr. AKM wrote the correct things.
As you mention about the service is wrong. Minimum 5 years completed service requires to eligible for entitlement.
Neither the Act provides or Supreme Court judgement provides for the term of 4 years & 6 months for entitlement.
Pl. note the same.
regs
Bhushan
From India, Mumbai
Mr. AKM wrote the correct things.
As you mention about the service is wrong. Minimum 5 years completed service requires to eligible for entitlement.
Neither the Act provides or Supreme Court judgement provides for the term of 4 years & 6 months for entitlement.
Pl. note the same.
regs
Bhushan
From India, Mumbai
Dear All,
Offcourse there is 5 year continuous service in the act but there is a judgement of some High court that if an employee has worked for 240 days in the fifth year.It will be counted as fifth year of service henceforth he will be eligible for gratuity.
regards
vikas
From India, Mumbai
Offcourse there is 5 year continuous service in the act but there is a judgement of some High court that if an employee has worked for 240 days in the fifth year.It will be counted as fifth year of service henceforth he will be eligible for gratuity.
regards
vikas
From India, Mumbai
Dear Friend, Please see the attachment . Brief of the Payment of Gratuity Act. Regards, PBS KUMAR
From India, Kakinada
From India, Kakinada
Dear Mr. Kumar,
As i have said it is 5 year service in the act but the court judgement has accepted 240 days service in the 5th year as eligibilty for gratuity.
Unfortunately i cant recaptulate the case law. If u want proof for this,plz go through the leading case laws on the subject.
From India, Mumbai
As i have said it is 5 year service in the act but the court judgement has accepted 240 days service in the 5th year as eligibilty for gratuity.
Unfortunately i cant recaptulate the case law. If u want proof for this,plz go through the leading case laws on the subject.
From India, Mumbai
Dear Vikas ji,
For legal clarifications please gothrough the web site:
www.legalpundits.com
Regards,
:)
PBS KUMAR
From India, Kakinada
For legal clarifications please gothrough the web site:
www.legalpundits.com
Regards,
:)
PBS KUMAR
From India, Kakinada
Dear Vikas,
It was the judgement of Madras High Court if an employee has worked 240 days in the fifth yr ,he is eligible for the gratuity. The judgemetn came in the year 2004.
U can see the LLR for the year 2004.
Regds,
Vikram Singh
From India, Delhi
It was the judgement of Madras High Court if an employee has worked 240 days in the fifth yr ,he is eligible for the gratuity. The judgemetn came in the year 2004.
U can see the LLR for the year 2004.
Regds,
Vikram Singh
From India, Delhi
Is there any official webiste/written document of gratuity department which clarifies that 30 day notice period would be considered as part of employment while deciding Gratuity payable in case the employee has completed 4 year 11 months of service.Would appreciate a quick response.
From India, Delhi
From India, Delhi
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