Gratuity Calculation: How to Handle 10 Years of Service with Limited Attendance?

Gratuity Calculation for Partial Attendance

What gratuity should be paid to a person who completed 10 years of work but attended only 200 days in the 7th year? How many years of gratuity should be paid to him?

What gratuity should be paid to a person who completed 10 years of work but attended 200 days in the 7th year? Then, for how many years should gratuity be paid to him? Is it 10 years or (10-1) years? Please help me at the earliest you can, sir/madam.

Please review the Payment of Gratuity Act first. You can ask your seniors in your organization for more information.

Regards,
Shivendra

Dear Vishal,

If one has 200 days out of 365 days (due to the mistake of an employee), the service will be accounted accordingly. That is, if he has 10 years of service, the service for gratuity will be 9.548 years, which will be rounded up to 10 years. Hence, he is entitled to get a gratuity amount of 10 x 15 / 26 x salary.

Abbas.P.S

If there are fewer than 240 days in an accounting year, is it right for employer gratuity to be deducted from that particular year?

Thanks.

Regards,
Bunti

Dear Bunti,

In my opinion, under the Payment of Gratuity Act, 1972, we are to consider the 'completed year of service,' which means continuous service of one year. We are not to consider the accounting year. For continuous service, one must go through Section 2A of this Act.

R.N.Khola

200 days shall be treated as 1 year as this period exceeds 6 months, i.e., 0.548 years, "provided that it is not due to any fault of the Employee." This is in accordance with Section 4, Subsection 2 of the Payment of Gratuity Act, 1972. Therefore, the Employee is eligible for Gratuity of 10 years.

Hope this is clear.

Regards,
Vishal

Can I know the detailed calculation? I mean, on what basis did you provide this calculation? I also want to understand this as I don't have anyone in my HR department; I am the only person in the HR department in our company.

Calculation Formula

10x15/26x salary.

Thank you.

He will receive 10 years of gratuity to the best of my knowledge, unless he was suspended in the 7th year, i.e., when he only completed 200 days of service from the company's side.

Regards,
Kumar Sivesh
[Email Removed For Privacy Reasons]

Dear P. Itikirala,

For gratuity calculation, the formula is Number of years of service x last drawn salary x 15 / 26.

1. Number of years of service: If the service comprises completed years and a fraction of a year, the fraction has to be rounded to the full year. i.e. If the fraction is 6 months or below, it will be rounded down. And if it is above six months, it will be rounded up.

2. Last drawn salary: Practically, it is advisable to take the average salary of the preceding twelve months.

For example: Let the service be 26 years and the salary be Rs. 20,000. Gratuity calculation is = 26 x 20000 x 15 / 26 = Rs. 3,00,000.

Note: Now the ceiling limit for gratuity is Rs. 10,00,000. But if the employer wishes, he can give above Rs. 10,00,000. However, as per section 10(10) of the Income Tax Act, tax exemption is limited to Rs. 10,00,000.

Abbas.P.S

For that 7th year, no gratuity will be payable. So, out of a 10-year service period, only 9 years' gratuity will be calculated and paid.

Since there is a rule that for gratuity calculation, 190 days apply for underground jobs and 240 days apply for surface jobs. If physical presence, including holidays, does not exceed the specified days, the calculation for the year may be forfeited.

Can anyone provide further suggestions?

Dear Sir, I want to ask, if an employee works for 10 days (in the 7th year) due to his own reason, then what should we do? Should the gratuity be calculated for the full 10 years he should get or for 9 years? Thank you. Regards,

What gratuity should be paid to a person who completed 10 years of work but attended only 200 days in the 7th year? In this case, how many years of gratuity should be paid to him?

Clarification Needed

Why did he attend only 200 days in the 7th year? Was he on leave or a service break? Please clarify the situation.

Regards,
Sumit

Dear Tanveer Ahmed Khan,

Attendance of 190 days and 240 days are for minimum eligibility to get Gratuity, and this eligibility will be achieved upon completion of 5 years' service. Thereafter, if the fraction of a year is above six months, it will be rounded up to a full year. For 6 months or below, it will be rounded down, and accordingly, it will be neglected.

Dear Vishal,

The answer to your last query can be found in this message. If the fraction is below 10 days, it will be neglected, and 9 years will be taken into account.

Dear Vishal,

Calculation of gratuity is very simple. First of all, pick up his wage taken by him from the last three months. Most people are confused regarding the calculation of wages for gratuity. Wages - basic + DA.

Gratuity - (Wages * 15) / 26. You have to count one complete year above six months. For example, if it's 10 years and 200 days, which means approximately 6 and a half months, you need to count it as a whole year. So, you will count it as 11 years.

It is wrongly said that the gratuity limit is ₹1000000/-. Though it has been accepted by law, it is not publicly published. So, till now, the maximum limit is ₹350000/-.

Thanks,
Sandeep Kumar HR Executive BSc, MBA, LLB, DPM

Gratuity Calculation Simplified

Calculation of gratuity is very simple. First of all, pick up the wage taken by the employee from the last three months. Most people are confused regarding the calculation of wages for gratuity.

Wages = Basic + DA
Gratuity = (Wages * 15 / 26) * No. of years

You have to count one complete year above six months.

Example: 10 years and 200 days means nearly about 6 and a half months. It means you have to count it as a whole year. You will count 11 years.

It is wrongly said that the gratuity limit is ₹1,000,000. It has been accepted by law, but it is not published publicly. So till now, its maximum limit is ₹350,000.

Regards,
Sandeep Kumar
HR-Executive
BSc, MBA, LLB, DPM

The Payment of Gratuity Act 1972 is amended to hike the limit to ₹1,000,000 w.e.f 24.05.2010. Accordingly, the Income Tax Act (section 10(10)) is also amended to exempt ₹1,000,000 towards gratuity from income tax.

Abbas.P.S

Yes, Abbas is right, and the calculation formula will be: last drawn salary (basic + DA) * years of service * 15/26.

Thanks & Regards,
Sumit Kumar Saxena,
[Phone Number Removed For Privacy Reasons], [Phone Number Removed For Privacy Reasons]