Off days, holidays are counted in service period for the Payment of Gratuity !

For the payment of Gratuity; In computing 240/190 days, as the case may be, in last year of service, the number of holidays whether Sundays or public holidays on which the establishment itself was closed and the employee did not actually work, should be included.

{A} Gratuity is calculated at daily rate of wages…for 15days of each year of service of employee.

Therefore for the correct payment of Gratuity;

(i) Sundays, off days, public holidays, days on which employees are given a holiday should be counted in period of service.
(ii) And such off days should be excluded while calculating rate of wages payable.

Otherwise also; generically speaking by common sense also, that should prevail upon employers and IT's Attorney's;

Daily wages=Monthly wages/26 (26 being average working days/month)
Hourly wages=daily wages/8 (8 being daily work hours)

--Gratuity is paid at the 'rate of fifteen days (wages)" based on the rate of wages last drawn by the employee.

Formulae of Calculation of Gratuity;

Gratuity= {( Basic+DA)/26*15*No. of years in service}
Here (Basic+DA) is as per last drawn wages.

To calculate No. of Years: after 5 calendar years;

-If employee has worked for more than 6 months in last year of employment then take it as= 1year
-If employee has worked for less than 6 months in last year of employment then take it as= 0 year

Thus if employee has worked for 4Y240D or 4Y190D as the case may be (from Date of Joining to Last working Day) and his last drawn wages were Rs. 20000/pm (Basic+DA) then

Amount of Gratuity would be = {20000/26*15*5} i.e. Rs. 57692.30
And if employee has worked for 5Y240D or 5Y190D then
Amount of Gratuity would be = {20000/26*15*6} i.e. Rs. 69230.77
And if employee has worked for 5Y180D then
Amount of Gratuity would be = {20000/26*15*5} i.e. i.e. Rs. 57692.30

{B} The employers and IT's Attorney's have unsuccessfully contested that off days should not be counted in continuous service.

And while calculating daily rate of wages off days should be counted

And monthly wages should be divided by ; 30 instead of ;26.

The contentions of employer and IT's attorney's were defeated in all forums i.e. before Controlling Authority of Gratuity, then Appellate Authority, then Single Judge, then larger Bench headed by Chief Justice.

This has happened in all cases that were taken before the authorities and courts.

And it is known to PROPERLY INFORMED employee, seasoned employees unions, trade union leaders, counsels of unshakable repute and integrity specializing in Labor/service matters and having successful track record.

The employees that are not properly informed are harassed and exploited by unscrupulous employers and their Attorney's that would do anything to get their FEE.

It is in the interest of employees to become PROPERLY INFORMED, to defend their rights and BEWARE of such unscrupulous employers and their Attorney's.

{C} Central Government Act: The Payment of Gratuity Act, 1972;

It is the Principle Act and various amendments have been made and gazette notifications towards amendments have been issued/published. For the convenience of everyone the amendments are mentioned in footnotes, in the copy of Principle Act that is available on website of Dept. of Labor of State Governments, Central Government and can be accessed thru internet.

e.g; THE PAYMENT OF GRATUITY (SECOND AMENDMENT) ACT, 1984 No. 26 OF 1984 that redefined the Continuous Service that can be seen at section 2(c),2A in the copy of Principle Act.

Section 2(c) : 'continuous service” means continuous service as defined in section 2A

Section 2A. Continuous Service.- (1) For the purpose 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 4[***] treating the absence as break in service has been passed in accordance with the standing orders, 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:

{The narration in the Principle Act posted at footnote at 3; about Sec2A is self explanatory i.e.; 3 Ins. by Act 26 of 1984, sec. 4 (w.e.f. 18-5-1984). }

{D} The Supreme Court observed, way back in year 1980:

"Ordinarily of course, a month is understood to mean 30 days, but the manner of gratuity payable under the Act to the employees who worked for 26 days a month ... cannot be called perverse .... to indicate the calculating monthly wages as wages for 26 working days is not anything unique or unknown, we may refer to a passage from the judgment of this Court Delhi Cloth and General Mills Ltd. v. Workmen [1969-II L.L.J. 755], which disposed of several appeals arising out of an award made by the Industrial Tribunal. The expression "Average of the basic wages" occurring in the scheme was explained by this Court as follows :

The expression "Average of the basic wage" can only mean the wage earned by a workman during a month divided by the number of days for which he has worked and multiplied by 26 days in order to arrive at the monthly wage for the computation of the gratuity payable."

The wages for 26 days are to be treated as monthly wages and not of number of days in the month.

D.W. Mills Ltd. v. M. P. Buch (1980, Labour & Industrial cases, 1052)

{E} The Apex Court decided in another matter;

ACT: Payment of Gratuity Act 1972, Sections 4(2) and 4(3)

Monthly-rated employee-Computation of gratuity-Scope of expression "fifteen days' wages"- Explained.

Interpretation of statutes Social Welfare legislation-Beneficent rule of construction-Adoption of.

Social security measures-Application of provisions-Doubt or difficulty arising-Necessity for Government to introduce legislation to cure the defect without waiting for interpretation by highest Court-Suggestion for setting up of National Labour Commission for Periodical review.

HEADNOTE:

The respondent-a monthly-rated employee of the appellant-a public limited company, ceased to be an employee on attaining the age of superannuation after completing 35 years of service. Since he was entitled to payment of Gratuity under the Payment of Gratuity Act, 1972, the appellant calculated the amount of gratuity payable under sub-s.(2) of s.4 on the basis that 'fifteen days' wages" meant half of the monthly wages last drawn i.e., for 13 working days. there being 26 working days in a month, The respondent being dissatisfied with this payment, made a claim under sub-s(1) of s.7, before the Controlling Authority, for payment of an additional sum of gratuity on the ground that the daily wages should be ascertained on the basis of what he actually got for 26 days and the amount of "fifteen days' wages" should be calculated accordingly, not by just taking half of his wages for a month of 30 days or fixing his daily wages by dividing his monthly wages by 30.

The Controlling Authority held; that for the purpose of calculating "fifteen days' wages" it was necessary to ascertain one day's wage and since a 665 month consists of 26 working days, the amount of gratuity should be calculated by dividing the monthly wages last drawn by 26 and multiplying by 'fifteen'; and not by just taking half of the monthly wages or by dividing such monthly wages by 30.

It is not correct to say that the decision in Shri Digvijay Woolen Mills' case does not lay down any principle. Gupta, J. speaking for the Court set out the following passage from the Judgment of the Gujarat High Court in Shri Digvijay Woollen Mills' case:

"The employee is to be paid gratuity for every completed year of service and the only yardstick provided is that the rate of wages last drawn by an employee concerned shall be utilized and on that basis at the rate of fifteen days wages for each year of service, the gratuity would be computed. In any factory it is well known that an employee never works and could never be permitted to work for all the 30 days of the month. He gets 52 Sundays in a year as paid holidays and, therefore, the basic wages and dearness allowance are always fixed by taking into consideration this economic reality... A worker gets full month's wages not by remaining on duty for all the 30 days within a month but remaining on work and doing duty for only 26 days. The other extra holidays may make some marginal variation into 26 working days, but all wage boards and wage fixing authorities or Tribunals in the country have always followed this pattern of fixation of wages by this method of 26 working days."

And then observed:

"The view expressed in the extract quoted above appears to be legitimate and reasonable."

It is to be regretted that the Government waited for a period of three years before introducing the Payment of Gratuity (Amendment) Bill, 1984 to remove the lacuna in the definition of continuous service in s.2(c) of the Act by specifically providing that a period of absence in respect of which no punishment or penalty has been imposed would not operate to interrupt the continuity of service for the purpose of payment of gratuity. It also amplified the definition of continuous service under s.2 (c) of the Act. Such a belated legislation must have worked great injustice to a large number of permanent employees.

In the result the appeals as well as the special leave petitions must fail and are dismissed with costs throughout. The costs are quantified at the sum of Rs. 10,000 two-thirds of which shall be deposited with the Supreme Court Legal Aid Committee of which Shri Subba Rao is the Hony. Secretary and the remaining one-third shall be paid to the respondent. N.V.K. Appeals and petitions dismissed.

Supreme Court of India
Jeewanlal (1929) Ltd.Etc. Etc vs The Appellate Authority Under The ... on 29 August, 1984

{F} The Payment of Gratuity Act has been enacted to introduce a scheme for payment of gratuity for certain industrial and commercial establishments as a measure of social security.

The object for which the Act was enacted, has been stated by the Supreme Court in the case of Jeevanlal (1929) Limited Etc. v. Appellate Authority Under the Payment of Gratuity Act and Ors. as follows:

8. The Payment of Gratuity Act 1972 is enacted to introduce a scheme for payment of gratuity for certain industrial and commercial establishments as a measure of social security. It has now been universally recognized that all persons in society need protection against loss of income due to unemployment arising out of incapacity to work due to invalidity, old age, etc. For wage-earning population security of income when the worker becomes old or infirm is of consequential importance. The provisions of social security measures, retiral benefits like gratuity, provident fund and pension (known as the triple-benefits) are of special importance. In bringing the Act on the statute-book the intention of the legislature was not only to achieve uniformity and reasonable degree of certainty but also to create and bring into force a self-contained all-embracing complete and comprehensive code relating to gratuity. The significance of this legislation lies in the acceptance of the principle of gratuity as a compulsory statutory retiral benefit.

Karnataka High Court
H. Ramappa S/O Hanumanthappa And ... vs The General Manager, Sri Yellamma ... on 3 October, 2007

{G} Although the facts of the matter, Law of the Land, enactments, statues, are known to employer and IT's Attorney's in Admin/Human Resources/Legal cells, and Lawyer'/Law Firms, when none of these subscribe to provisions of Law of Land/Enactments/Statue, the Authorities and Courts of Law show them the door and right way to fair practices.

Obviously the employer was having bad intention to not to make fair payment of Gratuity and IT's Attorney's also did not impress upon the employer to pay Gratuity fairly in accordance with provisions of Law/Enactments/Statue, and in the end employer and IT's attorney's got defeated in all forums, approached by them.

The employees that were united and were properly informed ultimately won in all forums and their rights were protected by the Authorities and Court of Law.

1. These four appeals raise a common question of law as to the mode of computing the amount of gratuity payable … under the Payment of Gratuity Act, 1972 (Act 39/72) (hereinafter referred to as the Act).

The appellant herein is the employer within the meaning of S. 2(f) of the Act and is liable to pay gratuity u/s 4 of the Act to its employees who have been in continuous service as defined u/s 2(c) of the Act.

Under sub-s.(2) of S. 4 of the Act, for every completed year of service or part thereof in excess of six months the employer is under an obligation to pay gratuity to an employee "at the rate of fifteen days (wages)" based on the rate of wages last drawn by the employee concerned. The employees claim that in computing the continuous service Sundays and public holidays on which days the Establishment is closed or the employees are given a holiday should also be taken into account and if they have been in employment for a period of 240 days in a year, they should be deemed to be in continuous service for a period of one year.

Further the rate of wages payable should be calculated for the actual number of days in a month after excluding Sundays, and at that rate, fifteen days' wages for every completed year of service should be paid to them.

The Controlling Authority under the Payment of Gratuity Act cum the Asst. Commissioner of Labour, Hyd., second respondent herein, accepted their claim in his order dated 25th August, 1983. The employer preferred an appeal against the order and the appellate authority under the Payment of Gratuity Act Deputy Commissioner of Labour, Hyd. (twin Cities) first respondent herein, confirmed the said order and dismissal the appeal.

2. The learned Single Judge before whom these orders were challenged did not accept the contention of the appellant-company that the public holidays and Sundays should be excluded in computing 240 days for purpose of determining whether the employers was in uninterrupted service for one year and dismissed the Writ Petition.

3. We may dispose off at the outset the contention which was only feebly pressed that wages paid for the entire month should be taken as paid for all the 30 days in the month in determining the rate of wages and not as paid for the actual number of working days. This contention runs counter to the well accepted principle that wages payable to an employee for a month are wages paid for the actual number of days he has worked which are taken as 26 days in a month after excluding Sundays which are given as compulsory holidays for all establishments; the holiday on Sunday is earned by the employee by working on the remaining days of the month. The rate of wages has, therefore, to be arrived at by dividing the total amount of wages paid in a month by 26 days and not by 30 days. The argument to the contrary has been set at rest by the Supreme Court in D.W. Mills Ltd. v. M. P. Buch (1980, Labour & Industrial cases, 1052). The Supreme Court held that "the wages for 26 days are to be treated as monthly wages and not of days."

5. We, therefore, hold that fifteen days wages for every completed year of service have to be calculated on the basis of wages paid to an employee for the month divided by 26 days and the quotient multiplied by fifteen days.

6…. in computing 240 days, the number of holidays whether Sundays or public holidays on which the establishment itself was closed and the employee did not actually work should be included. If after exclusion of these days the employee is found to have worked for not less than 240 days in a year he should be treated to be in uninterrupted service for one year.

Service undoubtedly means an employee actually discharging his duties and when continuous service means uninterrupted service, it should not be interrupted by any reason whatsoever.

But having regard to the inclusive definition of continuous service in S. 2(c) such uninterrupted service includes not only service interrupted by sickness, accident, leave, lay-off, strike or a lock-out but also cessation of work not due to any fault of the employee concerned. Cessation of work by the employee on a holiday, whether it is Sunday or a public holiday, no doubt, is not on account of sickness, accident, leave, lay-off, strike or a lock-out. But at the same time, it is not cessation of work due to any fault of the employee concerned. As part of the management of an establishment, the employer himself either in compliance with the Standing Orders or a statutory duty imposed upon him, in relation to the establishment in which the employee concerned is rendering service has to observe certain number of days as public holidays and Sundays. The Establishment itself cannot work or even if it works, the same employees cannot be employed on those days. In such cases the holidays are staggered and other employees are employed to do the work. For whatever reason it may be, the cessation of work by the individual cannot be termed as one due to any fault of the employee. Hence cessation of work of the respondent employees on Sunday and other Public Holidays during a year satisfied the inclusive definition of "continuous service". Though the service is interrupted, it is not an interruption caused due to any fault of the employee. If that be the position then as per Explanation I, he would be deemed to be in continuous service if he has been actually employed by an employer during the twelve months, immediately preceding the year for not less than 240 days in an establishment such as the appellant Company.

7….. We therefore find ourselves in agreement with the view taken by the learned single Judge that Sundays and holidays on which the establishment is closed and the employee is not required to work, cessation of work is not due to any fault of employee and consequently it constitutes uninterrupted service and if such uninterrupted or continuous service is for 240 days or more in a year, he would be deemed to be in continuous service for a period of one year and would be entitled to fifteen days gratuity calculated at the rate mentioned above. In view of the above discussion these Writ Appeals fail and are accordingly dismissed.

D.B.R. Mills Ltd. vs Appellate Authority, Under PAYMENT OF GRATUITY ACT,
In the High Court of Andhra Pradesh, W.A. Appeal No. 1191 of 1983
Bench: K M Reddy, M S Khan
JUDGMENT K. Madhava Reddy, C.J.

{H} The employees that are united and are properly informed know their rights and also know how to protect their interest and can defend their rights.

If the need be employees can handle employers and their Attorney's with the skills e.g; persuasion, persistence, reasoning, negotiations, knowledge of applicable enactments, law of the land, and penalties that be imposed on errand employers and IT's Attorney's. The matter can get resolved. Section;9 of the Act provide for penalty and jail term for ‘WHOEVER' avoids to payment of Gratuity.

Employee can take support of ‘Work Committee' (Authority as per Industrial Disputes Act) , Grievance Redressal Commmitee/Mechanism (Notified in some states) , seasoned Employee's/Trade Union leaders. The matter can get resolved.

Properly informed Employee can appear as ‘Party in Person' (PIP) and can save money and time that is spent on legal consultations, fee of lawyer/law firm and counter the unscrupulous employers and IT's Attorney's in effective manner.

Employee's/Trade Union leaders can represent employees while employee can act on other matters including job in same or next employment or any next venture.

Employees can engage their OWN very able senior counsels of unshakable repute and integrity specializing in Labor/Service matters and having successful track record.

In matters of Gratuity, in particular the employee can be represented by ‘Authorized Representative' as per Sec; 7 of Payment of Gratuity Act, 1972. The employee can authorize the ‘Authorized Representative' in writing. Such knowledgeable person on such matters may be near employee and employee has to just ask around amongst elders of the family, competent and experienced well wishers, unions... ‘Authorized Representative' can represent employees while employee can act on other matters including job in same or next employment or any next venture.

It is shocking that at many online portals employees are being asked to give up their rights be it ; Payment of Gratuity, Salary, Overtime, Bonus, Leave encashment etc etc by unscrupulous entities that loiter at online portals. While on the contrary the should be FULL and WHOLEHEARTED intention and sincere effort made to share, illustrate, and provide proper knowledge to affected employee and community of employees and Querists.

The community should make note of such entities and make such entities properly known in community of employees/unions and blacklist these entities permanently.

Employees should rather discuss their matters with their elders of the family, competent and experienced well wishers and rely on their OWN seasoned and well informed employees/trade union leaders, counsels of unshakable repute and integrity specializing in Labor/service matters and having successful track record.

The community of employees should become well informed and defend their interest.

The money that is rightfully of employee should be collected by employee.

The sensible employer will pay the money that rightfully belongs to employee.

The employer with unethical, unfair, antisocial, antinational, anti courts/judiciary approach and traits of habitual offenders, should be guided by IT's Attorney's to pay up without tantrums.

The role of Attorney's/Lawyers/Law firms engaged by employer's is to guide the employer to correct and legitimate ways not to illegitimate, unfair ways and practices.

The employer's and Attorney's of employers that are looking for illegitimate ways to usurp the hard earned money's of community of employee's should be noted and blacklisted by employees and such blacklisted employers and IT's Attorney's/Lawyers/Law firms should be made popular by community/Forums/Unions of employees.

In today's modern world that has speed of internet, it is easy to gain information and share the information.

Information means; being properly informed.

Information is the key to power to command and control one's affairs and protect one's rights!