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I read the article ‘Will employees gain if gratuity rules are tweaked?’ that appeared on BusinessLine sometime back. If you serve more than six months in the last year of employment, it is considered as a full year of service. So, if a person completes four years and 181 days in the fifth year, will the person be eligible to claim gratuity? Is 180 days considered six months?
John
Our response: In general, if you stay on with your employer continuously for five years or more, you are eligible to get gratuity.
But there are exceptions and legal rulings that relax the five-year continuous service rule to be eligible for gratuity. One, the rule is waived if an employee dies or is disabled.
Next, the Madras High Court in the Mettur Beardsell case had ruled that if an employee completes four years and 240 days in service, he will be eligible for gratuity.
So, to your query, if a person completes only four years and 181 days in the fifth year, he would not be eligible for gratuity.
But once a person becomes eligible for gratuity as per the above rules, the number of years of completed service to determine the gratuity amount as per the Payment of Gratuity Act takes into account the service of more than six months in the last year of employment. So, if you serve more than six months in the last year of employment, it is considered as a full year of service to determine the gratuity amount. For instance, service of 20 years and seven months will be considered as 21 years.
This is in the context of the article titled ‘Why the stock of Muthoot Finance is a good buy’ that appeared on BusinessLine on October 19.
It could be a perfect buy in this situation — very less risky counter. It can be averaged at various levels for the long term. Good point, Ms Keerthi.
Bala Krishna
‘All you need to know about IPO allotment’ that appeared on BusinessLine on October 20 was well-articulated. I stopped applying to IPOs long back, after several bitter experiences of non-allotment.
TS Thiruvenghadam
Regarding the ‘buy’ call on Muthoot Finance, gold loans picking up does correlate to rising gold price, but the after-effects are disastrous if the gold price falls.
Shailesh Desai MD
Our response: Muthoot’s average loan-to-value is at 54 per cent. Additionally, the loans are of shorter tenures, which should provide sufficient cushion during a falling-gold-price scenario.
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