Sec.2 of the Gratuity Acat reads as under:
(s) "wages" means all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employment and which arc paid or are payable to him in cash and includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance.
Payment of Gratuity Act, 1972
Section: 2A Continuous service. For the purposes of this Act, - (1) an employee shall be said to be in continuous service for a period if he has, for that period, been in uninterrupted service, including service which may be interrupted on account of sickness, accident, leave, absence from duty without leave (not being absence in respect of which an order [***] treating the absence as break in service has been passed in accordance with the standing order, rules or regulations governing the employees of the establishment), lay off, strike or a lock-out or cessation of work not due to any fault of the employee, whether such uninterrupted or interrupted service was rendered before or after the commencement of this Act.
(2) where an employee (not being an employee employed in a seasonal establishment) is not in continuous service within the meaning of clause (1), for any period of one year or six months, he shall be deemed to be in continuous service under the employer - (a) for the said period of one year, if the employee during the period of twelve calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than - (i) one hundred and ninety days, in the case of an employee employed below the ground in a mine or in an establishment which works for less than six days in a week; and (ii) two hundred and forty days, in any other case; (b) for the said period of six months, if the employee during the period of six calendar months preceding the date with reference to which the calculation is to be made, has actually worked under the employer for not less than - (i) ninety-five days, in the case of an employee employed below the ground in a mine or in an establishment which works for less than six days in a week; and (ii) one hundred and twenty days, in any other case;
Explanation: For the purpose of clause (2), the number of days on which an employee has actually worked under an employer shall include the days on which - (i) he has been laid-off under an agreement or as permitted by standing orders made under the Industrial Employment (Standing Orders) Act, 1946 (20 of 1946), or under the Industrial Disputes Act, 1947 (14 of 1947), or under any other law applicab1c to the establishment; (ii) he has been on leave with full wages, earned in the previous year; (iii) he has been absent due to temporary disablement caused by accident arising out of and in the course of his employment and (iv) in the case of a female, she has been on maternity leave; so, however, that the total period of such maternity leave does not exceed twelve weeks. (3).....................
xxxxxx
Persons involving in gratuity should have clear idea reg. 'wages', 'continuous service', 'break-in-service' etc. I believe LWP does not result in either 'break-in-service' for the purpose of reckoning 'continuous service' and/or 'reduction in entitlement of emoulments/rate of salary'. Which means his/her rate/scale of emoluments remains the same what he/she would have drawn had he/she has not gone on this LWP.
Even if he/she had not worked not in a single day during the salary month and "O' take home pay but still he/she is entitled for gratuity at the rate of salary (Basic + DA) what he/she otherwise would have drawn. We need not call this a 'Notional pay' as their entitled 'wages' has not been nullfied. Therefore LWP does not affect the wages for gratuity subject to the above conditions.
From India, Bangalore
1064(s) "wages" means all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employment and which arc paid or are payable to him in cash and includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance.
Payment of Gratuity Act, 1972
Section: 2A Continuous service. For the purposes of this Act, - (1) an employee shall be said to be in continuous service for a period if he has, for that period, been in uninterrupted service, including service which may be interrupted on account of sickness, accident, leave, absence from duty without leave (not being absence in respect of which an order [***] treating the absence as break in service has been passed in accordance with the standing order, rules or regulations governing the employees of the establishment), lay off, strike or a lock-out or cessation of work not due to any fault of the employee, whether such uninterrupted or interrupted service was rendered before or after the commencement of this Act.
(2) where an employee (not being an employee employed in a seasonal establishment) is not in continuous service within the meaning of clause (1), for any period of one year or six months, he shall be deemed to be in continuous service under the employer - (a) for the said period of one year, if the employee during the period of twelve calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than - (i) one hundred and ninety days, in the case of an employee employed below the ground in a mine or in an establishment which works for less than six days in a week; and (ii) two hundred and forty days, in any other case; (b) for the said period of six months, if the employee during the period of six calendar months preceding the date with reference to which the calculation is to be made, has actually worked under the employer for not less than - (i) ninety-five days, in the case of an employee employed below the ground in a mine or in an establishment which works for less than six days in a week; and (ii) one hundred and twenty days, in any other case;
Explanation: For the purpose of clause (2), the number of days on which an employee has actually worked under an employer shall include the days on which - (i) he has been laid-off under an agreement or as permitted by standing orders made under the Industrial Employment (Standing Orders) Act, 1946 (20 of 1946), or under the Industrial Disputes Act, 1947 (14 of 1947), or under any other law applicab1c to the establishment; (ii) he has been on leave with full wages, earned in the previous year; (iii) he has been absent due to temporary disablement caused by accident arising out of and in the course of his employment and (iv) in the case of a female, she has been on maternity leave; so, however, that the total period of such maternity leave does not exceed twelve weeks. (3).....................
xxxxxx
Persons involving in gratuity should have clear idea reg. 'wages', 'continuous service', 'break-in-service' etc. I believe LWP does not result in either 'break-in-service' for the purpose of reckoning 'continuous service' and/or 'reduction in entitlement of emoulments/rate of salary'. Which means his/her rate/scale of emoluments remains the same what he/she would have drawn had he/she has not gone on this LWP.
Even if he/she had not worked not in a single day during the salary month and "O' take home pay but still he/she is entitled for gratuity at the rate of salary (Basic + DA) what he/she otherwise would have drawn. We need not call this a 'Notional pay' as their entitled 'wages' has not been nullfied. Therefore LWP does not affect the wages for gratuity subject to the above conditions.
From India, Bangalore
Community Support and Knowledge-base on business, career and organisational prospects and issues - Register and Log In to CiteHR and post your query, download formats and be part of a fostered community of professionals.
Gratuity calculation.doc
Gratuity Calculation tool.xls