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Hello Everyone,

I have a query about gratuity calculation.

One of our employees officially retired on completing 58th year of age as on 04.09.2014 but continued working in the company until 23.11.2023. However, the HR department calculated his gratuity based on his last drawn salary as of 23.11.2023 instead of his last drawn salary as of 04.09.2014. His basic salary on 23.11.2023 was Rs. 29,113, while on 04.09.2014 it was Rs. 18,486.

Could you please provide guidance in accordance with the Gratuity Act in Gujarat?

Thanks in advance.

From India, Ahmedabad

The HR department was right in calculating the gratuity. Under Payment of Gratuity Act there is no mention about the age, say 58 years, for superannuation or retirement. If your age of superannuation is 58, and if the employee has continued to work beyond that, the actual date of exit, ie, 23-11-2023 should be taken as date of leaving, and for calculation of gratuity you should take his salary as on 23-11-2023, ie, 29,113, and also the service till 23-11-2023.
From India, Kannur

I concur with Madhu T.K as he has covered how gratuity is calculated.
From India, New Delhi

Relevant provisions of the Payment of Gratuity Act is reproduced for your guidance-
4. Payment of Gratuity.- (1) Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years,-
(a) on his superannuation, or
(b) on his retirement or resignation,
(c) on his death or disablement due to accident or disease:
Provided that 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 or disablement:
1[Provided further that in case of death of the employee, gratuity payable to him shall be paid to his nominee or, if no nomination has been made, to his heirs, and where any such nominees or heirs is minor, the share of such minor, shall be deposited with the Controlling Authority who shall invest the same for the benefit of such minor in such bank or other financial institution, as may be prescribed, until such minor attains majority].
Explanation.- For the purposes of this section, disablement means such disablement as incapacitates an employee for the work which he was capable of performing before the accident or disease resulting in such disablement.
(2) For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days' wages based on the rate of wages last drawn by the employee concerned:
Provided that in the case of a piece-rated employee, daily wages shall be computed on the average of the total wages received by him for a period of three months immediately preceding the termination of his employment, and, for this purpose, the wages paid for any overtime work shall not be taken into account:
Provided further that in the case of 2[an employee who is employed in a seasonal establishment, and who is not so employed throughout the year], the employer shall pay the gratuity at the rate of seven days' wages for each season.
3[Explanation.-In the case of a monthly rated employee, the fifteen days' wages shall be calculated by dividing the monthly rate of wages last drawn by him by twenty-six and multiplying the quotient by fifteen.]
(3) The amount of gratuity payable to an employee shall not exceed 4[twenty
lakh rupees].
(4) For the purpose of computing the gratuity payable to an employee who is employed, after his disablement, on reduced wages, his wages for the period preceding his disablement shall be taken to be the wages received by him during that period, and his wages for the period subsequent to his disablement shall be taken to be the wages as so reduced.
(5) Nothing in this section shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer.

From India, Bangalore
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