Calculating Bonus and Gratuity: How to Determine Amounts for a 12,000K Salary?

I wanted to know if any employee with a basic salary + DA of 12,000K per month. What amount should we consider for bonus and gratuity?

He is not entitled to receive a bonus under the Payment of Bonus Act, 1965. As far as the gratuity payment calculation is concerned, the amount of basic and DA shown by you is to be considered.

Regards,
R.N. Khola

I agree with the statement made by Mr. Khola that, in accordance with the provisions of the Bonus Act, an individual receiving a salary of more than Rs. 10,000/- is not entitled to a bonus. Additionally, they are eligible for gratuity based on their basic salary + D.A. after completing five years of continuous service in the same organization.

Regards,
KIRAN KALE

I have just completed 5 years with my company. My question is: Can a company deduct gratuity from the monthly salary as they deduct PF? I have just received a letter indicating that along with my PF deduction, there will also be a gratuity deduction. Please let me know if this is the correct procedure, as employees who have been with the company for the last 7-8 years have never had any gratuity deducted.

Regards,
Lucille

Dear, As per the Bonus and Payment Act of 1965, the employee is eligible for 8.33% of their basic salary as a bonus, and the gratuity eligibility is 4.15%. However, gratuity calculation is based on the duration of service in years. The minimum requirement for service is 5 years or 240 working days each year for up to 5 years.

Thank you.

Dear Lucille,

Gratuity is a liability of an employer once an employee has completed 5 years of service, and upon the employee's exit from the company, gratuity should be paid to them. Therefore, deducting it from the employee's salary is not permissible; it is against the law and contrary to the provisions.

One possibility is that if you and the management agree to an annual payment fixed on a package basis, it may include gratuity in the CTC. Please verify this. If there is no such agreement, you should protest against this practice to prevent any further negative consequences in the future.

Regards,
KIRAN KALE

The observation made by Kiran Kale is correct. As he has rightly pointed out, it has been shown as part of CTC and may not be a deduction. The gratuity contribution of the employer will generally be shown along with the PF contribution from the employer's side. Since the PF contribution is equivalent to the employee contribution, you might have assumed that gratuity will also be deducted.

Can you please update the status?

Regards,
M.V. KANNAN

There is no provision for the deduction of salary on account of gratuity. Gratuity is paid to the employee after the completion of 5 years in the organization for their good behavior. An employee is eligible for gratuity after completing 5 years only. If the employer deducts any amount from the salary for gratuity, and an employee leaves the organization before completing 5 years, how will the gratuity be paid to the employee?

Employers are not eligible to deduct any amount from the salary for gratuity.

Regards