prasadkashinath Started The Discussion:
For the purpose to calculate Gratuity under the shops & establishment act, what should be minimum service length and the salry, whether basic or gross.


I will make it more clear that:-

The organisation is covered under the shops & establisment Act by its nature of business.
Off course Gratuity will be calculated under the payment of gratuity Rules, 1973.

The calculation of Gratuity should be different based on the establishment whether it is covered under the Factory Act or S&E Act.
Dear Friend Gratuity is paid under Grtuity act not shops and establishment act Minimun he should have been worked 5 years cotinously in an organisation. Vasanth
Hi - Agreed with Vasu that Gratuity is paid as per Gratuity Act and not as per shop and establishment act however below is the formula for calculation of Gratuity

Basic * 15 / 26 * years = Gratuity not more than 3.5 lacs

Basic = Last Drawan Basic

15 = Halof of Basic

26 = 26 working days in a month

Year = Year of serivce which should be more that 5 years of continous employment


Just one correction 15 is not half of basic It is the number of days

An employee is eligible for 15 days of wage per year of completed service if he comp0letes 5 years

One day wage is calculated as per the Supreme Courts observation dividing the Basic +Da by 26 days.

That is how thge formula Last drawn basi+Da*15*Number of years of service/26

Shiva 15 is not half the wages It represents 15 days per year of service 26 represents a month as decided by the supreme court Siva
DA is also included in the basic for calculation of Gratuity. If the total service is 35 years then upto 30 years the above formula including Da is OK but for remaining five years gratuity is calculated taking into account one month salary for five years (in excess of 30 years). If the amount calculated is more than Rs.3.5 lakhs it is limited to 3.5 lakhs only. But when it falls below 3.5 lacks it will be as per actual. Gratuity is paid once in a whole period of service only after separation from the service.
Hi Mr. Siva from chennai has answered correctly and I fully agree with him. regards R G NAGENDRA
Dear All,

i have a point
an establishment started with 4 employees and in the 4th year there were 7 employees. in the middle 4th year the no of employees raised to 12.

Now my point is

Whether the no of years for calculation of gratuity will be counted from the date of joining of employee no 1 who is still in service or from the date act become applicable to the establishment.


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
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.

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