Gratuity Eligibility Gratuity Payment - PDF Download

Dear Shri V. Harikrishnan Ji,
You have explained my point of view more elaborately in most clear terms. Thanks.
Smt. Vijayita Ji may file her claim for gratuity and post her success story in this forum for reference in future.
11th March 2012 From India, Pune

Dear Harikrishnan sir,

Sir, You have given the clause of continuous service under section 2A(1) only but the explanation of clause 2 states that the female employee is eligible only for twelve weeks.

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 (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 Orders) Act, 1946 (20 of 1946), or under the Industrial Disputes Act, 1947 (14 of 1947), or under any other law applicab1c 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.

kindly explain how can we go about this.
12th March 2012 From India, Mumbai

Dear Mr.Shenbagarajan

Firstly, all the clauses of section 2A of the Payment of Gratuity Act has to be read together and no single clause of that section should be read in isolation. You please see section 2A(2). This section starts with this phrase “(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-----“. Therefore Section 2A(2) could be invoked only if section 2A(1) is not applicable to the case , that is when the employee is not in uninterrupted service, excluding the interruptions permitted under Section 2A(1). Section 2A(1) of the Payment of Gratuity Act and section 2A(2) of the Payment of Gratuity Act are mutually exclusive. In the case of Ms.Vijayita Nair, she had been in uninterrupted service from 1-1-2007 till 31-3-2012. The issue therefore is whether the interruptions in her service are allowed under section 2A(1). Section 2A(2) would come into operation only if Ms.Vijayita Nair was not in continuous service within the meaning of section 2A(1).

If you compare section 2A(1) of the Payment of Gratuity Act with section 25B(1) of the Industrial Disputes Act you would notice that section 2A(1) of the Payment of Gratuity Act has the clause underlined in addition to what is contained in section 25B(1) of the Industrial Disputes Act.

Section 2A(1) of the Payment of Gratuity Act:- 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 orders, rules, or regulations governing the employees n of the establishment) lay-off strike or a lock out or cessation of work dot due to any fault of the employee whether such uninterrupted or or interrupted service was rendered before or after the commencement of this Act.

Section 25B(1) of the Industrial Disputes Act:- For the purposes of this Chapter

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 authorized 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

The same comparison could be made of section 25B(2) of the Industrial Disputes Act and section 2A(2) of the Payment of Gratuity Act. While section 25B(2) of the Industrial Disputes Act is silent about employees working in establishments working for less than six days in a week, section 2A(2) of the Payment of Gratuity Act covers those employees also. In other words the coverage of section 2A(2) of the Payment of Gratuity Act is wider than the coverage of section 25B(2) of the Industrial Disputes Act. You would also notice that the explanation in Section 2A(2) of the Payment of Gratuity Act is a verbatim reproduction of the explanation to Section 25B(2) of the Industrial Disputes Act(Section 25B of the Industrial Disputes Act was introduced in 1964 with effect from 19-12-1964 whereas section 2A of the Payment of Gratuity Act was introduced in the year 1984 with effect from 11-2-1981.).

In Mohan Lal vs.Management of Bharat Electronics Limited,[1981 ] Lab.I.C. page 806 at page 814 (Supreme Court) Justice Desai held that “sub-section (2) of the Industrial Disputes Act provides for a fiction to treat a workman in continuous service for a period of one year despite the fact that he has not rendered uninterrupted service for a period of one year but he has rendered service for a period of 240 days during the period of 12 calendar months…. “ The real import of this decision is that section 25B(2) would come into play only if section 25B(1) is not complied with or satisfied or is not applicable.

As the wording of section 25(2) of the Industrial Disputes Act is similar to the wording of section 2A(2) of the Payment of Gratuity Act, the above decision of the Honourable Supreme Court could be followed in interpreting section 2A(2) of the Payment of Gratuity Act.

Section2A(2) of the Payment of Gratuity Act is applicable in the case of workmen/employees who have not put in uninterrupted service as contemplated in section 2A(1) of the Payment of Gratuity Act. One example would be those employees who are not employed on a continuous basis but are employed with breaks in their service in between. In such cases, even if the workmen/employees are not employed continuously for any specific period and are given “breaks”or “disengaged” in other words where the employer terminates the employer-employee relationship for a specified period and engages the very same person later after a gap of days/weeks/months/years then section 2A(2) has to be applied to assess the length of “continuous service” rendered by the employee.

If section 2A(2) is not there in the Payment of Gratuity Act, then employees/workmen whose services are interrupted for reasons not specified in Section 2A(1) cannot get any gratuity at all. The explanation is applicable to Section 2A(2) only and not to Section 2A(1).

With regards
13th March 2012 From India, Madras

Dear Sir,
So it means any person who is on rolls/service for 4 yrs and 240 days is eligible for gratuity whether he has worked or not for 240 days in each year.
But the Dalmia Magnesite Corporation, ... vs The Regional Labour Commissioner , madras high court judgement is different where it states 240 days working is must for every year even the employee is in continuous service.
Kindly help me in this regard.
14th March 2012 From India, Mumbai

Attached Files (Download Requires Membership)

Dalmia_Magnesite_Corporation,_..._vs_The_Regional_Labour_Commissioner_..._on_12_November,_1980.pdf (92.6 KB, 90 views)

Dear Mr.Shenbagarajan

Please see my previous postings. Section 2A of the Payment of Gratuity Act was inserted into the Payment of Gratuity Act in the year 1984 with effect from 11-2-1981. This point I have pointed out in my previous post. The Payment of Gratuity Act was enacted in the year 1972 and it contained section 2(c) which defined the term "continuous service". This definition of continuous service was amended in the year 1984 by the Amendment Act of 1984. This Amendment came into force with retrospective effect from 11-2-1981. This amendment was consequent to a judgment of the Honourable Supreme Court in Lalappa Lingappa vs Lakshmi Vishnu Textile Mills, Sholapur 1981(1) LLJ 308 in which the case the Honourable Supreme Court held interpreting Section 2(c)(as it stood before the Amendment Act of 1984) of the Payment of Gratuity Act that even permanent workmen were not entitled to gratuity for the years they remained absent without leave and had actually worked for less than 240 in a year. It was represented by several workmen and organisation of workmen that this interpretation had given rise to a situation where workmen were denied gratuity on the ground that they had not physically worked for 240 days in a year. Acting on these representations, the Government of India introduced an amendment to Section 2(c) of the Payment of Gratuity Act in the year 1984. The amendment reads as follows (in the Amendment Act of 1984).

"3.Amendment of section 2.- In section 2 of the principal Act, for clause (c) and the Explanation thereto the following clause shall be substituted, namely:-

'(c) "continuous service " means continuous service as defined in section 2A;"

4. Insertion of new section 2A .-In the principal Act after section 2 the following section shall be inserted, namely :-

"2A.Continuous Service.- {For the contents of Section 2A please refer the Act. I am not typing it here as it is very long}

The judgment referred to by you interpreted section 2(c) of the Payment of Gratuity Act as it stood prior to the Amendment Act of 1984. As section 2(c) of the Payment of Gratuity Act has been amended subsequent to the judgment referred to by you, that judgment cannot be considered as an authority for the interpretation of section 2(c) as it stands to day and which is applicable to the case of Ms.Vijayita Nair.

Even the judgment in the Mettur Beardsell case which is often referred to in this forum was delivered subsequent to the Amendment Act of 1984.

Therefore your presumption that the employee should have worked physically for 240 days in a year to claim gratuity under the Payment of Gratuity Act is not correct as it is based on a judgment which has not interpreted section 2(c) of the Payment of Gratuity Act as it stands to day.

With regards
14th March 2012 From India, Madras

Dear Sir,
It is now clear that 240 days is not a must for each year. only the service is counted for gratuity whether the employee is worked or not. so any person who has served in the organisation for a period of 4 years & 240 days is eligible for gratuity.
Thanks for your detailed and valuable information.
14th March 2012 From India, Mumbai

Dear Mr.Shenbagarajan
It cannot be said that 240 days is not a must for each year. If in a given case Section 2A(2) is applicable, then 240/190 days become relevant. What the PG Act says is that the employee should have put in "continuous service" for five years. What is "continuous service" is defined under section 2(c) read with section 2A of the Payment of Gratuity Act. The question whether an employee has put in "continuous service" for five years or not is a question of fact depending on the facts of each case.Similarly whether section 2A(1) will apply or section 2A(2) will apply depends on the facts of each case. It cannot also be said that "only the service is counted for gratuity whether the employee is worked or not", what the PG Act says that the service has to be uninterrupted and also enumerates the circumstances under which interruptions in service could be reckoned for calculating the uninterrupted service.
With regards
14th March 2012 From India, Madras

So in vijayita case how the company will accept to pay gratuity when she has not worked more than 100 days(Paid) in the 4th year.
No company will give the money/benefit easily unless the employee has served the company as per the policy.
Even she has served for 5 yrs she has not eligible for gratuity because she has not served 240 days in the 4th year.
Even we have the judgement from Honorable Supreme court, every company has laid their policy for gratuity for 5 years. unless the amendment is made in the POG act the company will not listen to this unless taken to the court or legal proceeding.
Moreover the company/employer will also fight for the justice from their side if taken to the law of court.
Even the insurance company giving group gratuity scheme is not giving the gratuity amount unless the employee is serving for less than 5 yrs.
15th March 2012 From India, Mumbai

Dear Mr.Shenbagaraman

In your last post you have stated "we have the judgment from the Honourable Supreme Court". Will you please give the cause title of the case, the date of judgment and the Honourable Judges who delivered the judgment. In case this judgment had been reported, the citation may also please be given.The information will be immense use to all.

The liability to pay gratuity is on the employer and not on the insurance company. The refusal of the insurance company to give gratuity under the group gratuity scheme is not a valid legal defence for refusing to pay gratuity under the Payment of Gratuity act.

Whatever be the policy of the company regarding payment of gratuity under the Payment of Gratuity Act, that policy cannot be less favorable than the provisions of the Payment of Gratuity Act and also the policy should not be contrary to the provisions of the Payment of Gratuity Act. I request you to read the provisions of section 14 of the Payment of Gratuity Act.

With regards
15th March 2012 From India, Madras

Dear Sir, I stated the judgement of 4 yrs 240 days. Still today many companies are following only 5 yrs for gratuity and 240 days working is must in a year.
16th March 2012 From India, Mumbai