Hi Guys,
Its been a while since I visited CiteHR. How are you all?
So, today I have came up with few questions related to Gratuity. Before the question, I will try my best to explain the exact scenario:
Our company has been incorporated before 6 years. At the early stage, we were not having proper CTC structure and there were no provision of Gratuity component in our structure. Later on after 2 years, we introduced Gratuity component in our CTC structure and it's been 4 years now to that implementation.
We have an employee who was with us since day 1. So, he has been associated with us since 6 years.
To calculate gratuity,
Do we need to consider 4 years (Since we implemented it) or 6 years (Since he joined)?
He had put resign after getting the hike in his salary, So should we consider his previous Basic salary or updated basic salary after increment?
Please let me know soonest if possible.

From India, Ahmedabad
Labour Law & Hr Consultant
Freelancer In Hr &indirect Taxes For
Sr. Hr Executive
Abhishek Unni
Marketing Executive
+2 Others

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Dear Neha,
A warm welcome back to you. Gratuity, being a statutory terminal benefit of employment, is not optional on the part of either the Employer or the employee once the Payment of Gratuity Act,1972 becomes applicable to an industrial Establishment under the Act.
Whatever the mode of wage and salary administration, the liability to pay gratuity and the right to claim arise from the day one of the application of the Act to the establishment as well as from the day one of the commencement of the service of the employees in the organization.
The important factors for calculation of gratuity are the last drawn salary comprising only of the sum of basic and dearness allowance and the total no. of years of continuous service rendered by the employee right from the date of his/her appointment till the date of termination of employment.
Therefore, you have to pay gratuity to the employee for his entire service of six years based on his last drawn salary.

From India, Salem

You will have to count his service as 6 years, please.
From India, New Delhi

Gratuity is applicable to the establishment from the day its in to operation and the day employees are taken on roll.
From India, Vadodara

The Payment of Gratuity Act is applicable from the day the employee strength of your Company reached 10. The employee in question was associated with you from the beginning. Hence, you have to calculate his service from the day your employee strength is 10. If he has completed 5 years of service he is eligible for gratuity. The gratuity is calculated based on the last salary drawn by him.
Labour Law Consultant

From India, Kolkata

Just a follow-on remark to the reply of Mr.Lakshmanan.
The poster has not mentioned the type of the establishment run by the Company. For the application purpose of the Act, no minimum number of employees is required in respect of the entities mentioned under clause (a) of s.s (3) of Section 1 of the PG Act,1972. It is required only in respect of establishment falling u/s 1(3)(b) and (c) only.
Even in respect of these establishments falling under clause (b) or (c), the entire service of the existing employees including the service prior to the date of of application of the Act has to be taken into account, if the termination of employment takes place on or after the date of application of the Act.

From India, Salem
abhishek unni

The answer lies in your question itself.
As you stated that the company introduced gratuity 2 years later, so the person who was with the company for 6 years wouldn't be eligible for gratuity as he the only completed 4 years considering that gratuity was introduced after 2 years.
I hope you found this information useful.
If you have any queries regarding any other labour laws please feel free to contact me @8356832404

From India, Thane

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