How Do I Calculate Gratuity for Long-term Staff Under Changing Rules?

Dear All,

Please, I need your assistance to compute the final entitlement due to some staff. They have worked for a period from 1st March 1991 to November 2011 and 1st August 1992 to November 2011, respectively.

Under the old arrangement, gratuity is due to a staff after 10 years of service, while under the new arrangement, it's 5 years with effect from 1st July 2001.

Questions on Gratuity Calculation

1. How am I to calculate their benefits using both the old and the new arrangements?
2. Where and how can I get the basis for the computation of both arrangements?
3. Would it be wise to just ignore the old arrangement as other exited staff had been paid prior to this time?

Thank you.

Sub-computation of Gratuity

What I understand is that your company has a gratuity scheme prior to the coming into force of the Gratuity Act 1972, under which gratuity becomes payable after a service of ten years. Whereas under the Gratuity Act, it is payable after a service of 5 years only. Your dilemma is which procedure is to be followed.

My view is as follows:

• You can calculate gratuity under the 10-year formula for the employees whose service is between 1991 to 2011 if it is beneficial to them in its overall terms and conditions. Since the Gratuity Act protects any existing scheme with better terms or to avoid any conflict with the Act, you can calculate gratuity for them under both the 10-year (old) and 5-year (Act) formula and pay them gratuity according to the formula which is more beneficial to them.

• With regard to the employees with service between 1992 to 2011, you can calculate gratuity under the 5-year formula as per the Gratuity Act. Since under the 10-year formula they are not eligible for gratuity, the Gratuity Act overrides any scheme if the scheme is not beneficial to an employee or a class of employees.

Regards,
B. Saikumar

HR & Labour Law Consultant
Chipinbiz Consultancy Pvt. Ltd
Mumbai
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