Gratuity Calculation Dilemma: Should I Start from 2005 or PF Enrollment Date?

Dear seniors, I have a question that you can help me solve. One of the staff members has left the company and rejoined. As per the law, we submitted Form 5 and 10 to the PF office and obtained the new PF Number. Now, my question is regarding the clearance of his gratuity amount. He originally joined in the year 2005, but we enrolled him under the PF act on 01/02/2006. Therefore, I would like to know if I need to calculate his gratuity from 2005 or from the commencement of the PF enrollment date? I am eagerly awaiting your prompt response.

With regards,

Clarification on PF and Gratuity

Please do not mingle PF and Gratuity. Gratuity is purely dependent on the company policy. You have to consider the last date of joining for gratuity.

Regards,
Alphonse
[Phone Number Removed For Privacy Reasons]

PF and Gratuity are totally different matters. It is solely at the discretion of the company which date of joining they consider for him. If the company wants to continue with his previous date of joining, then gratuity will be calculated from that date regardless of the commencement of the PF Act.

Regards,
Divya

Gratuity Eligibility and PF Number Transfer

It cannot be at the discretion of the employer but as required by law. That means, if his actual date of joining is 2005, he will be eligible to get gratuity from that date and not from the date on which he became a member of EPF.

While allotting a new PF number, there is a problem. If he has not withdrawn his old PF accumulations, you will have to transfer the same. The practical side of transferring from company X to company X (same company) needs to be looked into. Otherwise, you could have allotted the same (old) PF number and shown the period during which he was not in service as 'non-contributory' service period. For this, it will be better if you personally meet the Accounts Officer of the EPFO.

Regards,
Madhu.T.K

Dear Prashanth Joseph,

Points Regarding the Gratuity Act

- His First Date of Joining
- His Date of Relieving
- His Second (Rejoining) Date of Joining
- His Second Date of Relieving

Only after providing this information can we analyze his gratuity eligibility.

Regarding EPF, you can refer to Mr. Madhu's points, considering that his non-contributory period is shorter. If this period spans two contributory years, it is advisable to withdraw the first PF accumulations.

Regards,
S. Sethupathy
Excellent HR Services
Erode.

Understanding Gratuity and PF

Gratuity and PF are entirely different matters. As per the Gratuity Act, a minimum of 5 years of uninterrupted service is required to obtain the benefit of gratuity. The calculation formula is: (monthly salary * 26) / 15 days * number of years of service.

Regards,
Bashir

Dear Prasanth,

Gratuity and PF are different. You mentioned that an employee joined in the year 2005; hence, it crossed 5 years. Once he left the company and rejoined, he is considered a new employee, but he will receive gratuity for approximately 7 years of working.

Gratuity Calculation Formula

Formula: (last drawn monthly salary * 26) / 15 days * number of years of service (round off the months exceeding 240 days in the final year).

Example: If he worked for 6 years and 9 months (above 240 days), then for gratuity calculation, consider it as 7 years.

With regards,
Madhava Murthy

Understanding Gratuity and Provident Fund Acts

The Employees' Provident Funds and Miscellaneous Provisions Act, 1952, and the Payment of Gratuity Act, 1972, are two independent statutes.

Entitlement for gratuity is calculated from the actual date of joining of the employee, provided he/she fulfills the eligibility criteria as laid down in the said Act.

Best Wishes,
Vasant Nair

Dear Prashanth Joseph,

First of all, you should note that when an employee tenders their resignation from the organization, they are intimated through Form 10 to the EPF office. This signifies that all their dues have been cleared by the company, including wages, leave encashment, bonus, and gratuity, etc. If they rejoin after this, the past period mentioned in Form 10 will not be clubbed with the present period; this should be considered as their new service.

Secondly, the period for gratuity calculation should consider the date of appointment mentioned in the new appointment letter. Enrollment in EPF is another issue not related to gratuity.

Thanks & Regards,

Sumit Kumar Saxena

[Phone Number Removed For Privacy Reasons], [Phone Number Removed For Privacy Reasons]

I understand that the Payment of Gratuity Act is applicable to all "factories," mines, oil fields, plantations, ports, and railway companies irrespective of the number of employees employed, as well as shops and other commercial establishments employing at least ten or more employees. In order to be called a factory, an establishment should also have at least ten employees. Similarly, in order to be called a plantation, there should be at least fifteen workers. Mines, oil fields, or railway companies also cannot have less than 10 workers. Therefore, the coverage of the Payment of Gratuity Act cannot be said to be without any reference to the number of employees.

Please correct me if my interpretation of Section 1(3) of the Payment of Gratuity Act, 1972, is wrong.

Regards,
Madhu.T.K