Gratuity Confusion: Should My Last Drawn Salary or Renewal Month Basic Be Used for Calculation?

I joined a company on 1st Aug 2002, and I resigned on 30th April 2011, so the total worked is 8 years and 8 months, which means 9 years will be considered for calculation.

My basic salary was 22,500/- effective 1st April 2011. Before the increment, the basic salary was 15,000/-.

According to the Gratuity Act, I am supposed to receive gratuity based on the last drawn salary, which is 22,500/-. Gratuity calculation: 22,500 x 15 x 9 / 26 = 116,827.

Our company uses the LIC group gratuity scheme. Now, our HR representative is saying that they renew the gratuity scheme every year in December, so the basic salary for that month will be considered. His calculation is 15,000 x 15 x 9 / 26 = 77,885. So, according to his calculation, I'm losing 39,000/-.

Dear friends, could you please help me with this issue regarding gratuity calculation and the renewal policy of the group gratuity scheme? Is there any document that I can refer to in order to ensure the correct calculation?

Gratuity Payment Based on Last Drawn Salary

Gratuity is to be paid based on the last drawn salary. For the employee, the renewal date of the Gratuity Policy is not a concern. That is the responsibility of the employer. Therefore, you are entitled to receive gratuity of Rs 116,827.

Regards,
Madhu.T.K

Gratuity Act Reference

Please ask the HR to refer to section 4(2) of the Payment of Gratuity Act. Also, refer to section 4A, which deals with compulsory insurance. There is no mention that the amount of gratuity shall be restricted to the amount as per policy maturity or something related to the premium paid.

Regards,
Madhu.T.K

Madhu is correct; there is no relation to the renewal date in the calculation of the Gratuity payable. The last drawn salary at the time of exit from the organization has to be considered.

Regards,
Madhu.T.K

Dear Sir, Please help me in the calculation of gratuity for one of our workers. His date of joining (DOJ) is 01.07.2003. Below are his working days:

1. 01.07.2003 to 30.06.2004 - 237 days (No earned leave availed)
2. 01.07.2004 to 30.06.2005 - 189 days (During November & December, he was on ESI leave due to an accidental injury)
3. 01.07.2005 to 30.06.2006 - 253 days
4. 01.07.2006 to 30.06.2007 - 248 days
5. 01.07.2007 to 30.06.2008 - 250 days
6. 01.07.2008 to 30.06.2009 - 268 days
7. 01.07.2009 to 30.06.2010 - 251 days
8. 01.07.2010 to 30.06.2011 - 272 days

His basic pay is 6200/-. Could you please advise how many years of gratuity he can claim now?

Thank you,
Parveen

I too agree with Madhu. Gratuity is calculated based on the last salary drawn.

Regards,
Kalpana

According to me, your employee has completed exactly 8 years of service. Also, all leaves are treated as part of regular employment. So, the calculation goes as below: 6500 X 15 X 8 / 26 = Rs. 30,000.

Regards,
Kalpana

Gratuity Revision and LIC Group Gratuity Scheme

I worked at the Tamil newspaper Daily Thanthi from June 2002 to January 2013. My gratuity scheme is the LIC Group Gratuity Scheme. I resigned from my job in January 2013 and received a LIC gratuity amount of Rs. 98,327 as per the Majithia Wage Board. The honorable Supreme Court upheld the Majithia Wage Board award with monetary benefits effective from 11th November 2011. My last drawn salary was revised as per the Majithia Wage Board. However, the company refused to revise the gratuity. They stated that LIC gratuity is a one-time payment and not subject to revision. According to the Gratuity Act calculation, we consider the last drawn salary at the time of payment.

Can you please provide information on the rules regarding LIC gratuity revision when the salary is revised after resignation?

After payment of gratuity, if the salary is revised with retrospective effect, the employee who left in between will be entitled to get the difference in gratuity. It is true that since the premiums were paid to LIC based on the pre-revised salary, LIC may not be able to pay it, but the employer cannot escape from their liability of paying it.

The expression used in Section 4(2) of the PG Act, "Gratuity to an employee at the rate of fifteen days' wages based on the rate of wages last drawn by the employee concerned," would mean the wages which the incumbent was drawing at the time of his superannuation.