How to Calculate Gratuity for an Employee with Reduced Last Drawn Salary Due to Leave?

Clarification on Last Drawn Salary for Gratuity Calculation

I need clarification on the Last Drawn Salary concerning Gratuity. For example, a person resigned on 31.07.2010, but he was frequently on leave due to illness from 01.05.2010 onwards. As a result of this loss of pay, his salary for the last 3 to 4 months was only 50% of the actual salary. How should I proceed with issuing Gratuity to him? Should I calculate it based on 100% of his actual salary, or should I consider only the 50% that was paid to him for the last working month of his tenure? Please clarify.

Regards,
Vinod Narayanan

For the calculation of payment gratuity, the employee's last drawn salary will be taken into account, but not his last earnings. Accordingly, the salary would be 100%, without taking the LWOP into account.

Regards,
Abbas.P.S

Yes, I do agree with Abbastiti. While calculating gratuity, the salary will be based on the last basic salary, regardless of any Loss of Pay (LOP). I hope this clarifies it for you.

Dear Mr. Abbas & Mr. Telekepalli, can I get any supporting rule or act towards the same? If available, please quote.

Regards,
Vinod Narayanan

Interpretation of Wage Under the Payment of Gratuity Act

The interpretation of wage is reproduced from Section 4(2) of the Payment of Gratuity Act as follows:

Explanation: In the case of a monthly-rated employee, the fifteen days' wages shall be calculated by dividing the monthly rate of wages last drawn by him by twenty-six and multiplying the quotient by fifteen. Here, it is clearly stated that the calculation is based on the "monthly rate of wages last drawn." The rate is determined as wages earned divided by attendance.

Regards,
Abbas.P.S

Yes, it's true. Gratuity is calculated on the basic pay plus Dearness Allowance (DA) of his/her salary at the time of leaving. If you want more details, just search in Google "Payment of Gratuity Act." You can find all the details, sir.

Regards,
Harish