Gratuity Entitlement And Its Payment - DOC Download

Dear all,

Would you please assist me with reference to gratuity - that is paid after five years of continued service to employees and is calculated as follows: last availed salary * tenure period * 15 days / 26 days. On the other hand, when considering the CTC, we have Gratuity at 4.81% of the Basic Salary.

Now, my confusion starts from here - when should gratuity be taken into account, after five years or on a monthly basis? Or does this monthly calculation come into play after 5 years?

Please help me...

Thanks.

Dear Devendra,

Your gratuity will be paid to you only if you continue with the company for 5 years. This is a reward given to you for your loyalty. Therefore, you can only take out your gratuity in case you are leaving the company after serving it for 5 years.

Regards,
MK

Mr. Devendra's gratuity is to be paid to the employee after completion of 5 years. The monthly calculation comes after 5 years and is calculated based on the present salary (after 5 years).

Gratuity forms part of your CTC and is paid to the employees upon resignation after completing 5 years of service. Gratuity is paid as per the formula below:

Your SALARY (Basic salary + DA) last drawn. Gratuity is paid at 15 days' salary for each complete year of service.

15 days' salary is calculated as SALARY/26*15. Gratuity paid is SALARY/26*15*years of service. (period of service > 6 months is rounded to 1 year), i.e., 6 years 7 months is 7 years.

I hope this is now clear.

Dear Devendra,

As gratuity is a liability of the company, many companies are booking it on a monthly basis at 4.81% of the basic salary to add it to the books of accounts. However, employees are eligible to claim gratuity upon completion of five years of service at the time of separation. If an employee leaves before the stipulated five years, the booked amount is reversed.

I hope this is clear.

S. Sethupathy, Excellent HR Services, Erode.

Subject: CTC Designing and Calculations of CTC

Dear all,

I want to know how CTC is designed and what the method is to calculate CTC.

Thanks and Regards,
Aditya

Dear Devendra,

I agree with Mr. S. Sethupathy; Gratuity is eligible after completing 5 years of service.

With regards,
Sameer K. Ghosh

Dear all,

I want to know the basis of how and why 4.81% is taken as gratuity in CTC. Is this provided in any law?

RLDhingra

Dear Dhingra,

I am attaching the file in which I explained the finer points of the Gratuity Act and the calculation method to my client's accounts team. I hope you will gain a clear understanding from it.

S. Sethupathy
Excellent HR Services
Erode

Dear Mr. Dhingra,

4.81% of the basic plus dearness allowance is the gratuity liability of the employer every month. The quantum of gratuity is obtained by the following formula as provided under the Payment of Gratuity Act:
(Basic + Dearness Allowance) / 26 x 15 x Number of years of service. This is the liability at the end of service of the employee. The employer would like to assess his gratuity liability every month for many different purposes and reasons. Therefore, based on this formula, the monthly gratuity liability to the employer per Rs.100 is calculated as follows: Rs.100 / 26 x 15 / 12 = Rs 4.807 if you calculate using a scientific calculator, and if it is rounded off, it becomes Rs 4.81 per hundred rupees. (Here the division by 12 is done to assess the monthly liability as 15 days' wages are for one year (12 months) of service). If this amount is expressed as a percentage, it is 4.81%.

Dear Mr. Sethupathy and Mr. S. Harikrishnan,

Thank you for providing a detailed explanation. I now have a very clear picture.

RL Dhingra
Advocate & Labour Law Consultant
09818309937
email

Hi,

I want to know the gratuity calculation. I have worked for 5 years in the company. Here is my monthly breakdown:
- Basic: 12000
- HRA: 6000
- Special Allowance: 8000
- Medical: 1250
- Conveyance: 800
- PF: 1200

All amounts mentioned are monthly as of today, and I have completed 5 years. Could you please tell me my gratuity amount?

Regards,
Sanju

Dear Mr. RLDhingra,

Detailed below is how 4.81% works out as the monthly contribution of gratuity in CTC. Assuming your basic salary for gratuity is 100/-, gratuity for one year is 100/26*15 = 57.69. The gratuity for 1 month is 57.69/12 = 4.81. Yes, this is as per the Payment of Gratuity Act.

Dear Sethupathy,

Can I have your mobile number, please, so that I can clarify some doubts regarding my gratuity eligibility? Also, could you provide your email address? Please share it.

Regards,
Uday

Dear All,

What is the minimum wage per day for Karnataka State as cited below:

1. Sales and Marketing Personnel (Graduate & Above) [Skilled]

2. Data Entry Personnel (Graduate & Above) [Skilled]

3. Secretarial Personnel (Graduate & Above) [Skilled]

4. Telephone Operator-cum-Receptionist (Graduate & Above) [Skilled]

5. Typist/Clerk (Matriculate but not Graduate) [Semi-Skilled]

6. Driver (Heavy Duty) [Skilled]

7. Cleaner [Semi-Skilled]

8. Casual Labourer [Unskilled]

Kindly do the needful at the earliest.

+91-9930773309

Hi Seniors,

In my current organization, Gratuity is part of CTC. Every month, gratuity is being deducted, and it is not paid to the employees if he/she resigns from the company before completion of five years. PF is also part of CTC, and if an employee resigns before completion of five years, then PF is payable. But why is gratuity not paid? For the payment of gratuity, five years is a mandate. My point is when gratuity is shown as part of CTC, then why should there be a mandate of five years? Can you please guide me on this point?

Thanks & Regards,
T Sampat
Cell No. 9860797244