Gratuity Dilemma: Should We Base It on Entire Salary or Just a Portion? Seeking Legal Insights

Dear all, our company doesn't have a salary structure yet. The salary is paid based only on the gross salary. In this case, should the gratuity be calculated on the entire salary, or should we allocate a percentage of the gross salary as Basic+DA for the gratuity calculation? Is this legally acceptable? Help me, friends, please.

Regards,
ANU

Apart from ESI, all calculations should be made only on Basic+DA (PF, Gratuity, Superannuation). Therefore, gratuity should be calculated only on Basic+DA.

Regards,
Sendil G

As long as you do not have the salary structure broken up into Basic + DA (this must be greater than the minimum wages as per the respective act) and other allowances, it is implied that for all practical purposes, the wage is the consolidated wage you are giving month on month. So, Gratuity will be on the Gross salary only.

Regards,
M.V. KANNAN

Gratuity Act

If your service is 5 years or above, then you are eligible for gratuity compensation. If your establishment is non-seasonal, then 1 year of service salary plus 15 days of salary is your gratuity. For example, if your salary is 10,000 (10,000/26 = 385 per day wages), your gratuity for one year would be 385 * 15 = 5,775 Rs.

Employee Gratuity Eligibility in the Event of Death

Will the employee be eligible for gratuity even if he has not completed 5 years in the event of death? Will it be the same calculation?

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The employee's eligibility for gratuity in the event of death, even if they have not completed five years of service, is a common query. The calculation process in such cases can vary based on the specific terms of the employment contract or the company's gratuity policy. It is advisable to refer to the organization's HR policies or consult with HR personnel to obtain accurate information regarding gratuity entitlement in the unfortunate event of an employee's death before completing the stipulated five years of service.