Calculation of Gratuity under Shops & Establishment Act

Mr Singh

I saw your posting on gratuity as under


If I am permitted to interfere, I do not think there is any such provision in the Act I will be thankful if you could throw some light on this


Siva

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T.Sivasankaran

Thanks Siva

Dabas

You are correct nothing has been mentioned in the act that for every year of service in excess of 30 years of service one month's pay will be given. Actually this rule is applicable in some of PSUs. But I would like to mention that in public sector undertakings with the approval of board employee can obtain better terms of gratuity from their employer under any award/agreement/contract. In recommendation/observation of the 116th Report presented on the 29th August 2001 of the Committee of Raj Sabha allows do do so. The action taken report of the committee is quoted below:
"Section 4(3) of the Payment of Gratuity Act provides for the upeer ceiling of the amount payable as gratuity to an employee. In case however the employees can obtain better terms of gratuity from their employer under any award/agreement/contract from an earlier date, higher amount of gratuity is possible. There should not be any bar on any establishment/employer to provide better terms of gratuity from an earlier date. If any PSU has allowed higher gratuity from a retrospective date without such contract/agreement, such decision is not covered under the provision of the Act. Such violation of law does not call for amendment of the Act." Unquote. The interpretation of rule by parliament is like this.

You are correct nothing has been mentioned in the act that for every year of service in excess of 30 years of service one month's pay will be given. Actually this rule is applicable in some of PSUs. But I would like to mention that in public sector undertakings with the approval of board employee can obtain better terms of gratuity from their employer under any award/agreement/contract. In recommendation/observation of the 116th Report presented on the 29th August 2001 of the Committee of Raj Sabha allows do do so. The action taken report of the committee is quoted below:
"Section 4(3) of the Payment of Gratuity Act provides for the upeer ceiling of the amount payable as gratuity to an employee. In case however the employees can obtain better terms of gratuity from their employer under any award/agreement/contract from an earlier date, higher amount of gratuity is possible. There should not be any bar on any establishment/employer to provide better terms of gratuity from an earlier date. If any PSU has allowed higher gratuity from a retrospective date without such contract/agreement, such decision is not covered under the provision of the Act. Such violation of law does not call for amendment of the Act." Unquote. The interpretation of rule by parliament is like this.

Hi,

Thanks for the discussion & we have forget to point one important thing,

if one has got the salary of 240 days in a year, other wise that year would not be counted for calculation of gratuity,

eg- suppose one has not worked minimum of 240 days in a yaer due to some reason, but has served the industry for more that 15 years, in that case one will get gratuity for how many years - 14 or 15 ?


Regards
Arun

Merely because an employee has not worked for 240 days will not make him lose the benefit. A letter indicating break in service should have been given to him. Otherwise it will be deemed that he has the continuous service as prescribed under law.

This is my understanding of the Act and I had been following. I have also stopped gratuity in a few cases for the years based on this. However I will check this provision once again


Siva

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T.Sivasankaran

Dear All

I have a doubt. In factories act, for salary computations, we take 26 days a month basis and pay salary for all MR rated workers. This is because Maximum 48 hrs a week = 48*52=2496 hrs per year=208 hrs per month= 208/8=26 days a monthbasis

However under Shops & estab Act (i.e. for offices not covered under Factories ACt) can we need maintain the same 26 days a month basis for salary purposes or shall I pay on 30 days a month basis for salary purposes ?

Pl clarify
Thanks
KSS/9840093176

I was working with Regd. Firm (Partnership) from 7/9/1994 to 30/04/2007, at the time of left office I have not received any benefit from the Firm. So you are requested to let me know about all benefit including gratuity which I have to claim said firm (Please specify Act also)

Bonus For Regd. Firm (partnership) Please Specify Weather It Is 8.33% Or 20% (act???)

May i know why 15 per year will taken for gradity calculation?

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S. Saravanan