Do Gratuity Required Complete 5 years as a Continuous Service

By virtue of the judgment of Supreme Court rendered under the provisions of the Industrial Dispute Act in Surendra Kumar Verma vs. Central Govt. Industrial Tribunal,[(1980) (4) S.C.C.433)],

It is enough that an employee has a service of 240 days in the preceding 12 months and it is not necessary that he should have completed one whole year’s service.

As the definition of continuous service in Industrial Dispute Act and Payment of Gratuity Act are synonymous, the same principal can be adopted under the act also and hence an employee rendering service of 4 year 10months 11days is considered to have completed 5 years continuous service under sec.4(2) and thereby is eligible for gratuity.

4 years and 6 months (190 days = 1 year) where the company follows 5 day a week

4 years and 8 months ( 240 days = 1 year) where the company follows 6 day a week is eligible for gratuity.

The payment of gratuity ( second amendment) act, 1984 clarifies this. One needs to calculate the no of years and service completion as follows.

A company which follows 5 day week

Doj 1.05.2000 -

01.05.2000 to 30.04.2001 - worked for 190 days = 1 year

If we go by the above formula and if the person does not have any break in service he will be eligible for gratuity on 01.11.2004 

The gratuity will be paid based on date of joining and completion of years of service. It is not based on 4 yrs and 216 days. If the person crosses 5 years of service within that 216 days, then he need to be paid, i.e, based on the date of joining of an employee, the day when he completes 5 years of service, he will be eligible to get the gratuity. But whereas the calculation will be rounded off to the next higher or lower fraction after his 5 yrs completion. So no one will be eligible to get gratuity if he is not completed 5 years of service.

The gratuity will be paid when an employee dies before completion of 5 years service, and will be paid to the dependent family member or nominee