Understanding Gratuity: How to Calculate DA When It's Not Part of Your Salary?

Hi,

This is with reference to Gratuity. It is calculated as follows: Last drawn Salary X 15/26 X No of years of service, where the last drawn is Basic + DA. I know the basic number, but we do not have DA nowadays; instead, we go for HRA. In this case, how do we find the DA for companies covered by the Shops and Establishment Act? According to a notification of the Minimum Wages Act, I learned that DA is Rs. 899/- per month in Tamil Nadu. Is this DA amount correct?

Regards,
Neelam

Hi Neelam,

DA is notified by the State Labour Department category-wise. If the payslip does not reflect DA, it is not applicable to be paid along with gratuity. However, you cannot go for HRA as it will substantially increase the gratuity amount, which is never done.

Thanks,
Dy Mgr Adm*IR

If you do not have DA in your salary, you can calculate gratuity on the basic salary alone.

Regards,
Madhu.T.K

Determining Basic Salary and DA Calculation

In this case, first of all, you have to decide on a particular employee's basic salary. After that, you need to refer to the Minimum Wages Act. In this act, you will find the percentage of DA for the particular category of employees. After that, you have to calculate Basic + DA.