Change in Gratuity Policy - count only 15 day's salary under the head Gratuity - CiteHR
Umakanthan53
Labour Law & Hr Consultant
Mkandukuri
Director - Hr
Athakur28
Sr. Executive
+1 Other

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Dear Seniors, I have recently joined a company which is covered under Group Gratuity Scheme with LIC.

As a general practice annual premium is paid to LIC for renewal of the assurance.

As per Trust Deed the assurance shall be renewed on basis of one month gross salary of the members.

A specific amount, equilvalent to one month Basic Salary of each employee, is shown in ctc under the head Gratuity.



The management now wish to count only 15 day's salary under the head Gratuity.

The current formula by which employees have got gratuity after their resignation is as under:

Gratuity Amount = Last Drawn Basic x 30/26 x No. of years of Service

The management now want that henceforth, gratuity amount should be calculated as under:

Gratuity Amount = Last Drawn Basic x 15/26 x No. of years of Service

Please suggest that is it possible under Payment of Gratuity Act?

No; it is not possible in view of section 4(5) of the Payment of Gratuity Act,1972. The current formula of 30 days wages at the rate lastdrawn for every completed year of service on termination adopted by the management for calculation of gratuity either suo moto or by any agreement, apart from being a better term of gratuity, has by now become a customary concession or privlege or a better term of the conditions of service.
It is possible to change back to 15 days wages as it is legal. There may be some heart burns from employee angle, which need to be handled sensitively by HR
as per law gratuity = bsic salary /(30/26)*15. this is fair practice. your management might thinking for cost cutting...
Yes Panku, management is thinking to bring down the cost. kindly suggest appropriate action for me.
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