As per the purposed wage code now Gratuity calculation of wage for a payout of Gratuity will be at 50 % of individuals remuneration
Under this please guide me on whether we have to restrict a maximum of fifty % or we should calculate and pay on actuals if basic salary is 80% of their total remuneration

From India, New Delhi

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Dear Dixit,

I am not sure from where you got the information that for the purpose of calculation of gratuity as per the proposed Code on Wages,2019, 50% of the salary of the employee would be taken into account.

In this connection, I would request you to go through the definition of the term " wages " u/s 2 (88) of the Code on Social Security,2020 in addition to its section 53(2) under chapter V which deals with gratuity.

" Wages " defined u/s 2 (88) would normally mean all remuneration payable to an employee under the contract of employment whether by way of salaries. allowances or otherwise expressed or capable of being expressed in terms of money and include the components viz., (a) basic pay (b) dearness allowance and (c) retaining allowance, if any.
But the other components enumerated under sub clauses (a) to (k) are specifically excluded.
However, the first proviso to sec.2(88) insists first on a parity of one-half or such other percent as may be notified by the Central Government between the sum of the included components and the sum of the excluded components under sub clauses (a) to (i) only. If the sum of the sub clauses (a) to (i) exceeds the parity thus notified, the proviso further insists that the excess amount shall be deemed as remuneration and accordingly added to wages under the clause (88).

Section 53 (2) of the Code prescribes the formula for calculation of gratuity which is the same rate of 15 days wages last drawn for every completed year of service or part thereof in excess of six months as in section 4 (2) of the existing Payment of Gratuity Act,1972. The Explanation 3 to sec.53(2) further lays down that in respect of monthly rated employee, the 15 days' wages shall be calculated by dividing the monthly rate of wages last drawn by 26 and multiplying the quotient by 15 as in the existing PG Act,1972.

Based on the above, I think that you can decide for yourself.

From India, Salem

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