Gratuity Payment

Hi,
An employee has completed 4 yrs 10 months in the company, he has resigned now. As per our company policy for the gratuity act, we have mentioned 5 yrs’ completion. But as per labor law he will be eligible if he has completed 240 days in the 5th year of service, should we pay him irrespective of our company rule of mandatory completion of 5 yrs. Please request your input.

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Yes you have to pay Gratuity for those who have completed their 4 years and 8 months in the organization.

Thanks You.

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Adding to what @Arpana has shared.

We have some additional info here in our statutory page https://www.greythr.com/wiki/acts/payment-of-gratuity-act1972/

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Hi

You need to discharge your obligation under the Gratuity Act, so yes you need to pay. The company policy can be better than the act, not the other way round.

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Dear Veena,
If you browse the PG Act,1972, you will find sec.4(1) of the Act prescribing the minimum qualifying service of not less than 5 years of service in the same establishment as the eligibility for statutory gratuity. However, applying a beneficial interpretation to the term “continuous service” defined u/s 2-A of the Act, the hon’ble High Courts of Madras and Kerala had held that if the employee completes 240 days of continuous service in the fifth year, he becomes entitled to statutory gratuity in the cases of Mettur Bearsell Ltd V Regional Labor Commissioner [ 1998 LLR 1072 ] and B.Sreeja V Regional Labor Commissioner, Kollam (2015) respectively. Both the above judgments are in sync with the ratio decidendi of the judgment of the hon’ble Supreme Court rendered in Surendra Kumar Verma V Central Govt Industrial Tribunal [ 1980 (4) SCC 433 ].
It is imperative that case laws set down by the High Courts and the Supreme Court would take precedence over the Corporate Policy of any employer when the latter runs counter to the former.
Therefore, you have to pay gratuity to the resigned employee who had served for 4 years and 10 months in the establishment.
Best of Luck!

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