Hello HR folks,
I have an inquiry regarding the calculation of gratuity for employees who have completed five years of service and are now exiting the company.
As our company introduced the gratuity policy in October 2020, I would like clarification on whether the gratuity calculation for these employees should commence from the inception of their employment or from the implementation date of the gratuity policy in October 2020.
Your guidance on this matter is greatly appreciated, as it will assist in ensuring accurate and fair financial settlements for the departing employees.
Thank you for your attention to this matter.
From India, Pune
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I have an inquiry regarding the calculation of gratuity for employees who have completed five years of service and are now exiting the company.
As our company introduced the gratuity policy in October 2020, I would like clarification on whether the gratuity calculation for these employees should commence from the inception of their employment or from the implementation date of the gratuity policy in October 2020.
Your guidance on this matter is greatly appreciated, as it will assist in ensuring accurate and fair financial settlements for the departing employees.
Thank you for your attention to this matter.
From India, Pune
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Hi,
In this case, gratuity should be calculated from their date of joining and not from October 2020.
Employees who have worked for more than 5 years at the time of their resignation should have their gratuity paid based on their date of joining with the company.
From India, Madras
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1015In this case, gratuity should be calculated from their date of joining and not from October 2020.
Employees who have worked for more than 5 years at the time of their resignation should have their gratuity paid based on their date of joining with the company.
From India, Madras
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As per Sec. 4 of the Payment of Gratuity Act, 1972, gratuity is payable to an employee on termination of his employment after he has rendered continuous service for not less than 5 years:
a) on his superannuation; or
b) on his retirement or resignation; or
c) on his death or disablement due to accident or disease (in the case of death, the requirement of 5 years of continuous service is not mandatory).
As per Sec. 4A, every employer has to obtain insurance in the manner prescribed for his liability for payment towards the gratuity under the Act from LIC or any other prescribed insurer.
So, if an employee who leaves the company has completed 5 years of continuous service, they are obviously eligible for the payment of gratuity. It has to be calculated from the date of their joining till the date of separation and not from the date on which the company took the policy. Not taking a policy itself is a violation by the employer under the Act.
Regards,
From India, Madras
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a) on his superannuation; or
b) on his retirement or resignation; or
c) on his death or disablement due to accident or disease (in the case of death, the requirement of 5 years of continuous service is not mandatory).
As per Sec. 4A, every employer has to obtain insurance in the manner prescribed for his liability for payment towards the gratuity under the Act from LIC or any other prescribed insurer.
So, if an employee who leaves the company has completed 5 years of continuous service, they are obviously eligible for the payment of gratuity. It has to be calculated from the date of their joining till the date of separation and not from the date on which the company took the policy. Not taking a policy itself is a violation by the employer under the Act.
Regards,
From India, Madras
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Section 4A pertaining to compulsory insurance applies to organizations in states that have notified it as mandatory and does not apply nationwide. The section reads, "With effect from such date as may be notified by the appropriate Government," meaning that the state government must notify when this section enforcing compulsory insurance of gratuity fund takes effect. Otherwise, only a provision needs to be made in the financial statements of the company. I understand that very few states, such as Andhra Pradesh, have notified it.
From India, Kannur
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From India, Kannur
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Less than 5 years service - Eligibility for payment of gratuity.pdf
Gratuity calculation.doc