From When Does Gratuity Start For An Employee??

As my title suggests, I have a query. When is an employee eligible for gratuity? My company has tied up with LIC for gratuity. We send in the endorsement of the employee to LIC only after the employee is confirmed in the service. Is this the basic practice carried out in other companies, or is gratuity applicable from day one of the service? When is the gratuity form usually filled in? Please help. Regards, Swati.

If the employee is not an apprentice, then from day 1, the gratuity is applicable, but the employee is eligible to receive the amount after completing 5 years of continuous service in the same organization.

Dear Swati,

Any employee who completes a tenure of 5 years or more is eligible for the same. Up to Rs. 3.50 Lacs is the non-taxable gratuity amount. The formula for calculation is as follows: total years of service * average salary * 15/26.

Regards,
Bhagwan Tolani
Senior HR
TM Group
Email: bhagwan_007@in.com

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As my title suggests, I have a query. When is an employee eligible for gratuity? My company has partnered with LIC for gratuity. We submit the employee's endorsement to LIC only after the employee is confirmed in service. Is this the common practice in other companies? Is gratuity applicable from day one of service? When is the gratuity form usually filled out?

Please help.
Regards,
Swati

Dear Swathi,

There are some preconditions:

- One should have completed a minimum of 5 years of service in the organization.
- Salary means basic salary plus DA plus any other form of DA.
- Gratuity is calculated as 15 days' salary for every completed year of service.
- 15 days' salary is calculated as (basic + DA) divided by 26, which is then divided by 2 to give 15 days' salary.
- Completed year of service means one should have completed 5 years for eligibility of the service.
- A year means 6 months of service or more is considered as one year; less than 6 months is omitted.
- But basic one should complete 5 years.

Example: If one's salary is 10000 (including basic and DA) and

i) If he has completed 8 years and 4 months, the gratuity is calculated as follows:
(10000/26)/2 = 15 days' salary. Since he has completed 8 years and 4 months, for calculation, only 8 years are taken into consideration, i.e., 15 days' salary (as calculated above) multiplied by 8 will be gratuity.

ii) In case he has completed 8 years and 7 months, the 15 days' salary calculated as above will be multiplied by 9 to get the gratuity amount.

Hope I have clarified all the points.

Gratuity starts from day one, whether temporary or probationary.

The LIC has a scheme. If your company has taken that scheme, please send the details of the employee when one joins for duty.

Nagaraj

Dear Swati,

Most of them have answered your query. To add on, gratuity is applicable from day one of an employee's joining (even before his/her confirmation). However, gratuity, as you know, is given for continuous service (5 or more years) in an organization that remains the same.

Hope it's satisfactory.

Regards,
Shraddha

As per law, an employee is "entitled" to Gratuity if they have completed a minimum of 5 years of service. The Gratuity Act provides for a maximum of 3.5 lakh. There is also a formula for calculation. These are the minimum benefits that should be provided to an employee for continuous 5 years of service. The period of service and the maximum amount depend on the generosity of the employer.