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I have one doubt about the Payment of Gratuity Act. I heard that The employer will pay 4.85% on basic salary of every employee towards a gratuity fund for every month. Is it right??? Is there any provision like this in Gratuity Act?? Please clarify me...
From India, Tenali
Hr Officer
Insolvency N Gst Professional
Korgaonkar K A
Nagarkar Vinayak L
Hr And Employee Relations Consultant
Aniket Pathak
Sr. Executive Hr


Dear Prasad,
The Payment of Gratuity act is a small act with hardly 15 sections.A reading of the bare act would enlighten you.
If you are in HR,Knowledge of the act and rules is a must for you.
And if you are an employee then what is your entitlement and terms and conditions should be known to you.

From India, Pune
Aniket Pathak

Dear Prasad,
Making provisions internally or taking policy from lic which covers and pays gratuity claims is the decision of your management. Now, in case of LIC you just have to pay premium and LIC will be liable to pay the gratuity to the employee. If you make internal provision you have to clear the gratuity claims.

From India, Pune
Nagarkar Vinayak L

Dear Colleague,
The funding of gratuity with LIC is left to the company and contribution to it is governed by the scheme.
The payment of gratuity to eligible employees is governed by the Payment of Gratuity Act.
You are perhaps mixing contribution to LIC gratuity fund with rate of gratuity payment under the are two different things.
Vinayak Nagarkar
HR- Consultant

From India, Mumbai
Nagarkar Vinayak L

Dear colleague, Read 'under the Act' above. Vinayak Nagarkar
From India, Mumbai
korgaonkar k a

Dear Friends,
I would like to respond the queriest in my way.
The queriest asked a question, is there any provision like this in Gratuity Act i.e. paying 4.85% by employer on basic salary of every employee towards a gratuity fund for every month?
There is no such provision in Gratuity Act. There is a provision in Gratuity Act that the employer is liable to pay gratuity to employee who leaves on completion of 5 years of continuous service at the rate 15 days for every year completed.
When you pay gratuity at the rate 15 days for every year completed, the costing of this comes to 4.85% of basic.
It is very unfortunate that HR professionals have no grip over the subject matter they handle. I am very sorry to say it.

From India, Mumbai
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