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sureshsuha
One of our employee contracts mentioned the Gratuity clause as " Gratuity- You will be paid one month's salary for every completed year of service as per gratuity act". How much he eligible to get as gratuity after servicing of 6 years in the company? (Gross Salary break up Basic 50%, DA 10%, HRA 20%, other allowances 20%).

An employee claiming a one-month gross salary to be paid for 6 years?
Employer Claiming Gratuity Act only applies?

Please clarify which one is correct?

From India, Chennai
PROFESSIONALS AND BUSINESSES PARTICIPATING IN DISCUSSION
Madhu.T.K
Seasoned Ir Professional
Vmlakshminarayanan
Agm - Hr&admin
Jeevarathnam
Sr Manager Hr & Compliances
Nanu1953
Ceo-usd Hr Solutions
Sureshsuha
Student

vmlakshminarayanan
919

Hi,

As per the Gratuity Act payment of Gratuity will be at the rate of 15 days wages ( which means Basic +DA) for each completed year of service. Formula for Gratuity calculation will be Last drawn Basic+DA x 15/26 x no of years completed. As per your contract of employment order which says "as per Gratuity Act " hence payment as per Gratuity Act would be sufficient. However use of term one month salary for every completed year of service lead to this confusion. In the letter of contract is there any definition given for " one month salary" as one month Basic.

Based on Appointment letter there are chances of employee claiming for one month salary for each completed year of service.

From India, Madras
sureshsuha
Thank you for your reply.

It is confusing. No where mentioned anything like one month salary as basic + DA. this is the issue in his appointment letter. Appointment letter generally mentioned not specify anything like "either Gratuity Act Apply or One month Salary"

Based on gratuity Act, employer given gratuity working of "Basic +Da x 15/26 x Last drawn salary x 6 years".

But employee stating that " one month salary as per Gratuity Act working as "Basic +DA x Last Drawn salary x 6 years"

From India, Chennai
jeevarathnam
633

Many of the organisations mentions such unnecessary statements & such statement leads to confusion & cost to the company.

Where ever possible just mention as " As per the Act" such as " Gratuity shall be payable as per the Act" & that will be very clear.

As you have mentioned as 1 month salary you need to see whether you have defined what is salary & what is gross salary in the policy/salary breakup etc...? If specified then you can follow as per the same definition if not then need to pay on total salary. Also mentioned as 1 month salary for completed years but Gratuity Act is 15 days wages only.

Even Gratuity Act allows the higher benefits to the employee if the same is mentioned in the contract or policy but any higher benefits paid apart from the statutory benefits will attract Income Tax

From India, Bangalore
vmlakshminarayanan
919

Hi,

I suggest you to release Gratuity as per Gratuity Act ( Basic+DA) and explain the employee he is being paid as per Gratuity Act. You may convince him. If he go for appeal before Assistant Commissioner of Labour then you need to justify that you have paid as per Act but it was erroneously mentioned in the Appointment Order.

From India, Madras
Madhu.T.K
4193

Gratuity is payable on the total emoluments and not simply basic salary or basic salary and dearness allowance. Nowhere in the Act it is stated that gratuity is payable on the basis of basic + DA. There are some exclusion part in the definition of wages which includes HRA. Even the HRA, if, part of salary can not be excluded from the salary if it is paid to all the employees irrespective of their residential status, whether they reside in their own house or leased houses.

The above is a question of law and hence we can forget about it now. Here in the instant case the appointment order says that the employee is eligible to gratuity equal to one months salary per completed year of service. Unless otherwise mentioned, the salary shall include all components of salary as per the same appointment order. If the appointment order has shown salary with different components like basic, dearness allowance, HRA etc, and under the provision for gratuity it is stated that gratuity would be 30 days of basic and DA for every completed year of service, it would have been clear. But it is one month salary. Salary should mean salary inclusive of all allowances. You should include all fixed allowance.

From India, Kannur
Kusum Rana Thapa
Hi, Is there any Calculation for Gratuity in case of employee death.
From India, Delhi
vmlakshminarayanan
919

Hi, The completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death.
From India, Madras
Madhu.T.K
4193

The same calculation applies to death cases also, ie, 15 days pay for every year of service till death.
If you have purchased any death cum gratuity policy of the LIC, then the LIC may calculate it projected to the retirement year.

From India, Kannur
nanu1953
334

As per original post one month salary for each completed year of service to be paid as per PG Act. It is confusing. To my opinion if we read in between the line it is one month instead of 15 days as per PG Act.

Now whether it will be paid on Basic & DA or monthly gross. As per PG Act it should be paid on Basic & DA not on monthly gross which is practiced by all organizations all over India. Even in new labor codes it is on wages ( Basic & DA ).

S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions
+91 98310 81531

USD HR Solutions – To Strive towards excellence with effort and integrity

From India, New Delhi
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