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Employee Benefits in India – Payment of Gratuity – What Is Continuous Service?
The term “Complete Year of Service” means continuous service for ONE year.
An employee is said to have rendered continuous service, if—
Has been in uninterrupted service, including service interrupted by illness, accident, absence from duty with or without leave, stoppage, strike, lockout or stoppage of work not due to the employee’s fault. [Note: if an employee having been superannuated is re-employed by the employer without any break in service, he will be eligible for payment of service]
In case I or a non-seasonal establishment works for less than SIX days a week, it has worked for at least 190 days [in Mine] during the period of Twelve months or 95 days, in the previous SIX months, he will be deemed to have rendered continuous service for a period of ONE year or six months, respectively.
In the case of any other non-seasonal establishment he has worked for at least 240 days in the preceding 12 months or 120 days in the preceding SIX months, he shall be deemed to have rendered continuous service for a period of ONE year or six months. , respectively.
In terms of seasonal setup, it has been operational for at least 75% of the days the building has been operational.
For this purpose, an employee is deemed to have worked on a day on which:
It is suspended under agreement or according to standing rules;
He has been on leave with full pay, earned in the previous year;
He has been absent due to temporary disability caused by an accident arising out of, and in the course of, his employment, and
In the case of a woman, she has been on maternity leave not exceeding Twelve weeks.
To explain it better, we have compiled a list of frequently asked questions along with answers.
Frequently Asked Questions-1 Natasha joined ABC Limited on 2 June 2003. She was on maternity leave from 1 September 2006 to 31 March 2007. After the birth of her baby, she decided to take a year off. She rejoined the company on 1 April 2008. Finally, she resigned on 15 September 2011. Will she qualify for Exemption?
Answer: NO, she is not entitled to Freedom. Although she joined the company on June 2, 2003, however, she took a break of ONE year. After re-joining the company on 1 April 2008, she did not complete the minimum continuous service of FIVE years and was therefore not eligible for redundancy. Her second period with the company will be considered new employment.
In this case, to calculate the eligibility, you need to consider the following –
Was she on the company’s roster when she broke one year?
Was she paid during her break?
If and only if, your answer to both questions is yes, only she will be entitled to free will and her free will will be calculated for Eight Years.
Frequently Asked Questions – 2 Ramesh joined XYZ Limited on 11th July 2005, he resigned on 1st June 2010. According to the terms and conditions of employment, he has to give a notice period of TWO months. Will he be eligible for exemption if –
Scenario – 1 Will he serve the entire notice period?
Scenario – 2 Does he give one month’s notice?
Scenario – 3 Will he get relief on the day of his resignation?
Answer – To calculate continuous services of five years, you must consider his work until the last working day. The date of retirement is not relevant. In the first case, he will be entitled to compensation because he will complete his continuous service of FIVE years on July 10, 2010, and his last working day will be on July 31, 2010.
In the 2nd and 3rd position, Ramesh will qualify for free will. According to the judgment of the Madras High Court in the case of Mettur Beardsell Ltd [represented by its Personal Manager]Madras v/s Regional Labor Commissioner [Central Authority under the Payment of Gratuity Act, 1972]Madras, it was said that if an employee has rendered continuous service of 240 days in the fifth year of service then for calculation of money, it has to be considered as if he has completed FIVE years of continuous service.
Frequently Asked Questions – 3 Nitin joined MNO Limited on 10 October 2009. On 13 August 2012, while driving back from the office, he met with an accident and died. Will his family deserve Freedom?
Answer – According to Section 6 of the Severance Pay Act, 1972, the completion of FIVE years of continuous service shall not be required if any employee’s employment is terminated due to death or disability. So, Nitin’s family will be eligible for free pay.
If the employee has a family, he must name one or more family members and no one else. However, if the employee has no family, he can nominate a person or people of his choice. In addition, if the employee acquires a family after nominating a person or persons of his choice, that nomination will be invalid and the employee must nominate anew one or more members of his family.
Frequently Asked Questions – 4 Meera joined ABC Limited on 21 February 2006. For the year 2009 and 2010, she had NRI status due to frequent travel to USA, Germany and UK for various projects and activities. to perform, on behalf of ABC Limited. She resigned on 13th March 2012. Will she qualify for Freedom?
Answer – Yes, she will deserve Freedom. Her NRI status and frequent travel to foreign countries does not disqualify her. She has been in continuous service at ABC Limited since she started in February 2006.
Frequently Asked Questions – 5 ABC Limited, an Indian company, hired Robert as their Business Development Manager on September 11, 2007 for the North American market. He is a US Citizen and is based out of New York. He retired on May 6, 2014. Is Robert eligible for Exemption?
Answer – Robert is not entitled to Freedom. He is working in USA, therefore, Indian labor laws will not be applicable to him. Benefits under the Exemption Pay Act, 1972 apply to those persons, who are employed by Indian companies to work in India. Travel to different countries for business development or the execution of projects or assignments during employment is considered continuous employment.
We hope this information is useful.
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