If Gross Salary is less than MW Act declared by the Govt., how to calculate Gratuity on actual salary or wages declared by the govt.? For example, if the Govt. declares 7500 (Basic) + 2500 Sp. Allowance and the actual Gross salary is 8000/-, which salary is applicable for Gratuity.
From India, Pune
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1From India, Pune
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Though the sum total of the basic and D.A. of the last drawn wages (based on the definition of "wages" under the Act) is one of the factors in the formula for the calculation of gratuity under the Payment of Gratuity Act, 1972, we must note that it is not the wages actually drawn by the employee on the date of termination, but the "rate of wages last drawn" as per section 4(2) of the Act. Therefore, the logical inference is that it is the wage drawable on the date of termination. As per section 12(1) of the Minimum Wages Act, 1948, it is the duty of an employer of any scheduled employment to pay wages to employees at a rate not less than the minimum wages fixed under the Act.
Therefore, (a) if the last drawn wages are, in general, less than the minimum wages fixed, the employer has to pay gratuity only on the basis of the minimum wages payable.
(b) If the minimum wages fixed by the Government comprise components in addition to basic wages, as per the definition of the term "wages" under section 2(h) of the Minimum Wages Act, 1948, what you've mentioned as "special allowance" will form part of the wages as it cannot be categorized into the excluded items under the definition. If I remember correctly, there is a Supreme Court ruling that the special allowance, if granted to an employee, in the absence of specific and explicit mention of its purpose, would form an essential part of the wage for the purpose of indirect monetary benefits of the employment. In effect, if the actual last drawn wages are less than the sum total of basic plus special allowance fixed by the Government, the gratuity shall be payable only at that higher rate.
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From India, Salem
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Therefore, (a) if the last drawn wages are, in general, less than the minimum wages fixed, the employer has to pay gratuity only on the basis of the minimum wages payable.
(b) If the minimum wages fixed by the Government comprise components in addition to basic wages, as per the definition of the term "wages" under section 2(h) of the Minimum Wages Act, 1948, what you've mentioned as "special allowance" will form part of the wages as it cannot be categorized into the excluded items under the definition. If I remember correctly, there is a Supreme Court ruling that the special allowance, if granted to an employee, in the absence of specific and explicit mention of its purpose, would form an essential part of the wage for the purpose of indirect monetary benefits of the employment. In effect, if the actual last drawn wages are less than the sum total of basic plus special allowance fixed by the Government, the gratuity shall be payable only at that higher rate.
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From India, Salem
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