Terminal/Annual Benefits

Dear Sir(s):
I am little confused and seek your help. I am confused with "Service compensation". The shops act says any employee who has put in a service of more than one year is eligible for service compensation of 15 days of wages per year worked.
My confusion is that it is as good as Gratuity which is an entitlement subject to completion of 5 years of service. Then what is an incentive for an employee to put in a service beyond 5 years in a company when he is getting a similar benefit if he leaves it before completing 5 years?
Looking forward to an early reply.
Thanks,
Shradha

Graduity is over and above service compensation or any other such allowances / compensations...
So you can get the service compensation every year + get graduaty at end of five years...

Dear Mr.Mirza,
Thank you very much for taking interest in my query.
So, it is for sure that the employer need to pay the service compensation @ 15 days wages per year worked, if he leaves the company before completing 5 years. Please confirm if I am correct.
Thanks onceagain,
Shradha

Hi,
Please note that Gratuity is paid on completion of 5 years service whereas the service incentive what you are talking about will depend on the company (to immplement the same or not) but Gratuity is to be paid to the employee (even after completion of 1 day (after he / she completes 5 years) and the employee leaves. Dont get confused here what I am trying to say here is let us assume that the employee has completed 5 years on 12.09.05 & he / she is leaving the organisation on 13.09.05 the company is liable to pay the gratuity.
You are already aware that for each year of service put in it will be equivalent to half month salary (basic) divided by 26 days (in a month!!! pls note Sundays are not included) . For cross verification pls refer The Payment of Gratuity Act 1972. All the best & hope your confusion is cleared now.
Regards,
Sadashiv Rao 8)

Hi,
I have joined this forum recently. I seek for clarification on Gratuity. The act says that gratuity is payable to employees at the completion of 5 years of services and there is a formula for its calculations.
I would like to know if it is mandatory for companies to pay the Gratuity to the employees even if it is not mentioned in the appointment/offer letters and company is not doing any deduction towards gratuity. (My company is running fifth year of operation). Or is this act flexible as per the companies internal policy.
I will appreciate your early responses.
Regards
Nidhi

Hi Nidhi
Gratuity is mandatory. This is a benefit additional to the salary. So you will have to pay gratuity as per Gratuity Act ,irrespective of whether you mentioned in the Appointment letter or not. It is a retirement benefit
Dr.Thomaskutty

Hi nidhi,
This is pertaining to your query on the Gratuity benefit. Please note the following points:
a) Gratiuty is to be paid to the employee (mandatory ) on completion of 5 years service (when he is leaving the organisation after 5 years )
b) since you say that your company is in the 5th year then naturally employees who have been there from day 1 will automatically complete 5 years of service.
c) In calculation of Gratuity only 26 days are considered (minus sundays)
d) The calculation will be half month basic pay divided by 26 days X the no. of years of serivce put in (divided by 365 days)
I hope that this information will help you out on your query. for more details you can also refer to the THE PAYMENT OF GRATUITY ACT 1972.
All the very best to you.
Best Regards,
Sadashiv Rao :D

Hello All,
I dont think that "servise compensation" is applicable in India. Because in India we have Payment of Gratuity Act enforced. If I m wrong please clarify.
Amit Goyal