How Do You Calculate Gratuity When Basic Salary Changes Every Year? Seeking Advice!

Gratuity Calculation Confusion

I have a little confusion about the calculation of gratuity. Typically, we calculate it as: (((Basic + DA) / 26) * 15) * number of working years. However, I am unsure about how to calculate it when an employee receives an increment each year and the basic salary changes annually. Can we calculate gratuity every year? Please advise.

Thanks,

ncj

Dear Member,

This is to be calculated on the last drawn rate of Basic & DA/VDA if any. We are not required to calculate gratuity every year. For more details, go through section 4 of the Payment of Gratuity Act, 1972.

With Regards,
R.N.Khola

Dear All,

I have a little confusion about the calculation of gratuity. Usually, we calculate it as: (((Basic + DA)/26) * 15) * number of working years. But how do we calculate when an employee receives an increment every year and the basic salary changes annually? Can we calculate gratuity every year? Please advise.

Thanks,
ncj

Hello,

The last drawn basic salary will be taken into consideration for gratuity calculation.

Dear Navin,

We will consider only the last drawn salary even though the basic salary changed every year for an employee.

(last drawn salary (basic + DA) * total years of service * 15) / 26

Regards,
Sai Prasad.

Eligibility for Gratuity in Group Companies

What about if a person works within group companies for 5 years? For example, Mr. A joins an organization X (India - Madras) on 1st April 2000. He was deputed to organization Y starting from 1st April 2004 in the USA - Los Angeles. Subsequently, he was deputed to organization Z in 2006 (India - Ahmedabad). All the above-mentioned organizations are separate entities but under one group company (Indian MNC) with the parent company called XYZ. Would he be eligible for any gratuity?

Dear Pawan,

Yes, he is entitled to the Gratuity. As he has not resigned from any unit and perhaps used a transfer letter for moving from one unit to another, his years of service within the group will accumulate and make him entitled to claim gratuity.

Thanks and Regards,
Deepak Jain

If you have taken any insurance policy under the Payment of Gratuity Act, 1972, then please contact your insurance branch office to obtain information on the payment of premiums for your employees.

Regards,
R.N.Khola

How to Calculate Gratuity Premium for Each Employee

The trend in IT companies is to designate a base pay and a flexible benefits plan, which includes personal pay, coupons, HRA, LTC, etc. Retirals are kept separate. (All the above constitute the CTC.)

Gratuity Payment Consideration

My question is, what is considered for gratuity payment?

Thanks for your help in advance.

Best regards.

Annual Gratuity Eligibility Inquiry

I would like to know about the Annual Gratuity criteria regarding the following situation. I joined Company X in India in June 2010. Subsequently, I was sent to Japan for training for 1 year and 3 months starting in September 2010. Prior to my training, the company requested that I submit a leave application for the training period. The training took place at Company Y, the parent company of X. Upon completion of the training, I returned to Company X in December 2012, where rejoining formalities were completed. Since then, I have continuously worked with Company X.

Given this scenario, would I be eligible for Annual Gratuity in June 2015?

Thank you.

Regards

Hi,

I have completed 5.2 years of service with one of the organizations where they have mentioned Retirals bonus as 49,248 in annual CTC, which may be considered as DA. So the calculation would be like [24,624 + 49,248] X 15 / 26 X 5 = Rs. 2,13,092 [basic + DA] X 15 / 26 X 5.

But now they are calculating as [Basic Rs. 24,624/- + (Rs. 49,248/12)] X 15 / 26 X 5 = Rs. 82,869/- I wonder and get confused why they are dividing DA by 12 again. Please suggest whether I am wrong or they are wrong?

Hi Will,

Can DA be divided by 12 when calculating gratuity? That too [basic salary + DA/12] * 15. When Retirals are mentioned as annual, it should not be divided into monthly, right? Also, taking the 15 days into consideration.

Thank you.