How Will Reduced Basic Pay Affect Gratuity Calculations During Compensation Restructuring?

Dear All, This has been a wonderful site for problem resolution in areas of HR, and I appreciate the help rendered by the HR professionals. I do have a query regarding the restructuring of the compensation in the organization. We are in the process of redefining the basic pay and allowances and defining a fixed part of the total CTC. Given the current structure, the basic pay for many of the employees will reduce. Now, during the calculation of gratuity, the employee will have a reduced basic pay in the current year compared to the year before. So, how will the calculation take place?

Regards,
Pratima

Gratuity Calculation Based on Last Drawn Basic + DA

The gratuity calculation is made on the last drawn basic pay plus Dearness Allowance (DA). Therefore, the calculation shall be made on the latest basic pay plus DA being paid to the employee.

Thank you, Avika, for the response. I was hoping for a different method so that I could convince my employees. Let's see if I can figure this out. Thanks again.

Regards, Pratima