Industrial Relations And Labour Laws
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Can someone clarify on the below questions related to gratuity pay-out.
1) Some organizations do the gratuity payout as follows: Can someone help me to understand if this is the from Payment Act or the organizational good will.
If the employee has joined the organization prior to FY 2004, the gratuity is calculated as Last Monthly Basic * No. of years of exp
If employee joined on/after 2004 it is computed as Last Monthly Basic * No. of years of exp * 15/26
2) For a employee joined in 2003, what is the gratuity calculation to be used.
3) Is the no. of years calculated should be used as
i) No. of years between date of joining and date of submission of resignation or
ii) No. of years between date of joining and last day of service (inclusive of notice period).
Thanks In advance!!
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In deciding the eligibility and calculation of gratuity payable as per Payment of Gratuity Act the year of joining as to 2004 or 2005, as the case may be, is immaterial. It is purely on the basis of his completion of five years in the organisation worked out from the date of his joining till his last day of working and the amount of gratuity is calculated on the last drawn salary and is 15 days salary for every completed year of service or fraction of a year over six months.
Though the eligibility factor has been disputed over a few court verdicts which allowed gratuity for those who have not completed five years of service but have completed four years and 240 days in the fifth year, none of these verdicts has said that it is based on joining prior to a particular year. Hence it is t be understood that gratuity is to be calculated based on the date of joining of the employee.
Dear Khatib,
Any person who has completed five years of service in the same organization thats 4 years + 240 days will be eligible for gratuity as per the Payments of Gratuity Act, 1972.
- Gratuity is applicable: Every Factory, Oil field Plantation, Port, Mine, Railways, Shops and Establishments etc, which employees 10 or more employees.
- As per Section. 2 (S) 15 days wages for every completed year as if the month comprises of 26 days at the last drawn wages. Therefor the calculation that you have provided is correct.
- Calculation of price-rated employee (Section 4) - 15 days wages for every completed year on an average of 3 months wages.
As per your 2nd query, as Mr. Madhu T.K. answered it should be calculated based on the joining of the employee.
Dear Kathib
In your formula, please make it no. of years of service instead of no. of years of experience. Though it is a common fact that with each year in service makes a man experienced in service, the Act uses the term 'service' and not experience. Thanks & regards,
Whether the employee joined before or after 2003 gratuity should be calculated as follows;
last drawn Basic+DA divided by 26, multiplied by 15, again multiplied by no of completed yrs of continous service subject to maximum of Rs ten lakhs.Years of service to be reckoned back from date of relieving to date of joining.
Varghese Mathew BIL,PGDPM.
Hello Madam
I resigned after completion of 4 years and 243 working days (exclding Weekly Off & Leave) [4 Year 10 Month & 3 Days with all leave & Weekly Off]. In My Full & Final Company denied to pay gratuity.
How to proceed now and approach now through legal route. Whom to contact & how.?
Anand Parikh

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