Gratuity Calculation: Should It Start from Joining Date or Confirmation Date? What If an Employee Leaves Early?

The component of gratuity should be calculated from the date of joining or the date of confirmation. From when does the liability of the company to pay an employee become mandatory? What if the employee leaves before that period?

Please let me know if you need further clarification or assistance.

Gratuity is payable to employees who have completed 5 years of continuous service. Gratuity is payable from the date of joining, i.e., the date of probation (training, contract, retainership basis are not considered). This should be mentioned in the HR Policy of the company and the appointment letter issued to the employee. Gratuity is calculated as = Last drawn (Basic+DA) x 15/26 x No. of years of continuous completed service. It can be a component in CTC. If an employee leaves before 5 years, gratuity is not payable. Gratuity up to Rs. 3.50 lacs is not taxable. LIC has a good Group Gratuity Scheme. Payment of gratuity is a statutory requirement. See attachment.

Thanks Regards Pari.

Thank you very much, Pari. But a small confusion still remains. If the company policy dictates the payment of gratuity from the Date of Joining, then what happens if the company decides to initiate gratuity calculation from the Confirmation date instead? Is it mandatory to calculate gratuity from the date of joining? Under which clause?

Hello,

Can anyone tell me whether the criteria to claim gratuity is strictly 5 completed years, or can one claim even if the service rendered is 4 years and 11 months?

Please reply.

Gratuity payable under the Gratuity Act. Calculation of years begins from the date of joining. It is compulsory to pay gratuity (social welfare) at the time of leaving the job or retirement. The basic criterion is the completion of 5 years.

Hi,

I have just received the latest update that if a person has completed 4 years and 9 months, they are eligible for Gratuity.

Any feedback?

Dear Pari,

Thank you for the good information. As you mentioned, gratuity is payable from the date of joining. It should also be included in the HR policy by the company.

My query is: Is it not mandatory for the company as per the Gratuity Act?

Please reply.

Regards,
Ganesh Nautiyal

Hi all,

Gratuity is also paid to employees who have not completed 5 years' tenure with the organization. For example, in the banking sector, ICICI Bank follows the norm of paying it after 5 years. However, if you compare it with Reliance, they will calculate it from the day you became part of the organization until your last day, and the same amount will be reimbursed to you with the F&F amount. Please update me in case there are any updates on the same.

Regards,
Tina Vij

Yes, eligibility for payment of Gratuity at 4.10 years. The same applies for the PF. This means if an employee has completed 9.10 years, then he/she falls under the Pension Fund scheme. Gratuity is indeed payable.

Dear Friends,

Yes, gratuity should be taken into consideration from day one. According to me, if an employee has completed 4 years and 240 days, then he/she will be eligible for gratuity.

Friends, please correct me if I am wrong...

Regards,
Amith R.

Hello,

Can anyone tell me whether the deceased employee had worked for three months so that his family can claim gratuity?

Please reply.

Kumer Singh

I think there is a lot of discussion on the Gratuity, and the latest information I have heard is the same as what Mr. Amith R. has said. I have heard that for this update, there is a Case Law as well, but I am unable to find it to date. Until I have the same information, I can't comment on it. However, as per the Gratuity Act, it is still applicable only after completing a full 5 years of service with the organization.

In the case of an employee's death, this condition does not apply. The employer is required to provide the Gratuity to the nominee of the deceased employee, even if their service falls short of 5 years.

Gratuity Payment and Tax Exemption Details

Gratuity is payable to employees who have completed 5 years of continuous service. It is calculated from the date of joining, i.e., the date of probation (training, contract, retainership basis are not considered). This should be mentioned in the HR Policy of the company and the appointment letter issued to the employee.

Gratuity is calculated as: Last drawn (Basic + DA) x 15/26 x No. of years of continuous completed service. It can be a component in CTC. If an employee leaves before 5 years, gratuity is not payable. Gratuity up to Rs. 3.50 lakhs is not taxable. LIC has a good Group Gratuity Scheme. Payment of gratuity is a statutory requirement.

Just for information, the gratuity tax exemption limit is revised to 10 lakhs. If a person has received gratuity up to 10 lakhs, there is no tax liability. However, if there is more than 10 lakhs, then the person would pay tax on the excess of 10 lakhs.

Regards,
Pari.

Understanding Gratuity Calculation

Gratuity is a part of the CTC (Cost to Company) and its calculation depends on the organization. It should be calculated from the employee's date of joining the organization. The maturity period to claim gratuity is 5 years.

For example, if an employee stays with the organization for 4 years and 6 months, they are eligible to claim gratuity. However, if the employee stays for 4 years and 5 months, they are not eligible.

Hope this helps.

Is the payment of gratuity mandatory for the employer? If yes, then under which section of the Payment of Gratuity Act is it mandated? What are the conditions, such as the number of employees, under which it is mandatory for the employer to pay gratuity? If an employer decides not to pay gratuity or delays the gratuity payment, what is the penalty for them?

Dear Seniors,

Kindly advise, I am working in a private company where there are no components like basic salary, Dearness Allowance (DA), or House Rent Allowance (HRA). The salary is consolidated.

I would appreciate your help in calculating the gratuity amount after completing 5 years of service.

Thank you.

Hello, can anybody suggest if an organization is 25 years old and it started the Gratuity scheme just one year back (2016), is the employee who has been working for the last 10 years entitled to claim for the gratuity today? Or do they have to wait for five years from the date the gratuity scheme started in the organization?

Pari sir,

You mentioned that gratuity is not required to be paid for the probation and training period. However, our worker is claiming for the training period as well. I expect clarification on this, including relevant laws or cases if possible.

Thanks,
Udaya