How Should My Company Record Monthly Gratuity for Contractual Employees?

Respected seniors,

I need your help as my company outsources data entry operators, IT support employees, etc., on a contractual basis. An individual has to work at a specific customer site on behalf of my company. As per the contract, our customer pays gratuity on a monthly basis.

Is there any specific rule or procedure regarding recording gratuity on a monthly basis or daily basis? Is there a legal format that must be maintained at the company's end?

To the best of my knowledge, gratuity is applicable after five years of continuous service, and the calculation involves 15 days of the last basic salary multiplied by the number of years performed.

Please do the needful ASAP.

Regards,
Vikas Kumar

Dear Vikas,

I believe any company will calculate your Gratuity from day one of your service because Gratuity is part of your CTC. However, when it comes to the actual payment of Gratuity, I am not entirely certain.

As per my understanding, legally Gratuity can be paid upon completion of 4 years and 240 days of service in any company. Please correct me if I am mistaken.

By the way, I am attaching an Excel file containing examples of Gratuity calculations which may be helpful to any of you.

Regards,

Amith R.