Anonymous
Hi CiteHR Friends, Can someone help me to understand the calculation of severance pay? Is the length of service period taken at pro rata or only completed years of service? What is the rule in this regard? Thanks
From India, Mumbai
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Umakanthan53
Labour Law & Hr Consultant
KK!HR
Management Consultancy

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KK!HR
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As regards statutory benefits like gratuity, service for more than six months is to be calculated as one year and less than six months has to be ignored. PF benefits are linked to the completed years of service. As regards non-statutory benefits, it will depend on the rules and regulations of the organisation.
From India, Mumbai
umakanthan53
5943

Dear friend,

" Severance Pay " refers normally to the amount of compensation payable by the employer to an employee in the event of foreclosure of the contract of employment at the instance of the employer as per the preexisting terms of the contract.

It's also called as " redundancy pay " or " retrenchment compensation " depending on the circumstance necessitating foreclosure of the contract of employment as well as the Cadre of the employee. In the case of employees falling under the purview of the Industrial Disputes Act, 1947, Section 25-F prescribes the quantum of retrenchment compensation payable and the conditions precedent thereof. The retrenchment compensation has to be calculated on the basis of the number of completed years of service on the date of retrenchment. The formula is 15 days average wage last drawn for every year of completed service.
Regarding other Cadre of employees it shall be strictly as per the exit clause of the contract of employment. In the West and the U.S.A, It is based on weekly as well as monthly basis depending upon the employment position and the Severance package which at times includes stock option, extended health insurance cover etc., during post-exit.

From India, Salem

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