Gratuity - 4.81%

Dear All, Kindly let me know the importance of 4.81% under Gratuity Act. Pl. also let me know whether 4.81% is fixed for all companies or there are any exemptions. Thanks, Vadiraj Kulkarni

Daer Vadiraj, there are so many companies include 4.81% gratuity part (lumsump) in ctc. The gratuity formula is: Last basic+vda*service in years *15/26 Suppose basic including vda is rs.10000 and length of service is 5 yrs Example like : 10000*5*15/26= 28846 4.81 permonth like 481 per month 5 years means 60 months 481*60=28860 Regards A.K.Gautam 09669200408

Dear Gautam, Thanks for your reply... Kindly let me know how did u arrive @ 4.81%. I want to know whether this 4.81% is standard or we have to arrive at this figure based on other details like basic, DA, etc. In case, 4.81% is standard for everyone, kindly request you to provide any references to the statutory compliance law books. For example, one of our vendor has calculated Gratuity employer contribution as below: "We arrive @ 4.17% as shown below: Eg: Let us assume the Individuals Basic is Rs. 7000/- : 7000/12 (No. of Months) = 583.33/- (One Month Eligibility) One Month Eligibility / Basic = 583.33/7000*100 = 8.33 % (Per Month) / 2 (Gratuity is payable for 15 days in an year) = 4.165% (Rounded off to 4.2%)" Request your clarification. Thanks & Regards, Vadiraj Kulkarni

8.33% per month is 30.14 days as average (365/12). But for gratuity only 26 days to be considered. That is why, you are getting difference in the factor. Correct is 4.81%

Dear All, Gratuity is given to employees who have rendered his/her services to the organisation.In lieu of his/her continuous service this is given as reward by the organisation. Its social security measures for the employees by the the government through organisation. It is kind of security at the time of retirement. In other country Social security is very exhaustive. Since India has had United Family culture and still contniue the same culture , post retirement livlihood is secured and cared by United Family.But in other country this is not in practice. 4.81% of Basic Pay of individual employees is kind of provision made by the accounts department of the organisation to ascertain kind of Liability. This is reflective in PL A/c and Balance Sheet. Some Organisation consider it as part of CTC. 4.81% monthly calculation. It arrive as under: 15/(26*12month)%. The maximum amount payable as per law is Rs3,50000/- which is not taxable, beyond it is taxable. It is enforced by Law. Otherwise No organisation wish to pay such amount without any contribution of service. I think this will suffice your requirement and satisfy the querries. V K Sharma, Tarapur

There is ONLY ONE METHOD for calculating Gratuity entitlement. It is as under: Wages/26*15* No. of years of service. Example: Length of Serive of Mr. A is 10 years. Basic + DA is Rs.10000/- Gratuity will be calculated as under: Rs.10000/26*15*10= Rs.57692. Vasant Nair

Dear Vadiraj, The Gratuity Act stipulates payment of 15 days' wages for each completed year of service. According to decisions by Courts (Ref. Laxmi Woollen Mills Case, and many others), 15 days' wages is not = Half a month's wages. The Courst have specified that in order to arrive at one day's wage, you have to divide the monthly salary by 26. If you take monthly salary, divide it by 26 and multiply by 15, the result would be = 4.807% of the monthly salary. That is why the quick way of computing gratuity is to multiply the monthly salary by 4.81%. Regards Gerry

Mr. Vadiraj Kulkarni Gratuity is calculated as Last drawn Basic+DA*15/26*No.of years of service as it is directly claculated for month as under as 4.81% 15/26 for 01 year basis divided by 12 months for arriving one month gratuity i.e 15/26*1/12= 0.048076923 and for percentage multiply with 100 and i.e 4.807692308 and it be calculated as 4.81% That is how we arrive gratuity 4.81% for one month. rgds S.V

Guys, In act there is provision for gratuity when i leaves after completing five years of service. Comp's have come with such percent as 4.81%. i want to know if the person leaves the job within a year or two his/her deducted amount is returned to the employee or not ? i expect a clarification here pls . Regards Rajeev Dixit

Dear Sir, Pls check this simple method. ( Basic + Da ) / 26 *15 /12 = Monthly Gratuty fOR eX : 5000 / 26*15 / 12 = 240.50 YOU CAN CROSS CHECK 5000 =100% ? = 4.81% 5000*4.81 / 100 = 240.50 Regards D V Gosavi [Login to view]