Is Gratuity Mandatory for IT Employees? Seeking Clarity on Industry Norms

Request if somebody can inform if gratuity is compulsory for the IT industry or not.

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Hi,

I have a question regarding gratuity in the IT industry. Can someone please clarify if gratuity is mandatory for employees working in this sector? Thank you.

Dear Friend,

It should be covered. The minimum applicable start when the employee has completed five years of service.

Regards,
PBS KUMAR

Hello,

"Its" should be "it's" there according to the act, just like that of PF and ESI because it's all for employee benefits.

Regards,
Shanti

Hi Shanti,

These acts are for employee benefits and give them more privileges. All acts are applicable where 20 or more employees are working.

Regards,
John

Hi,

As per the law, one is entitled to gratuity when they complete 5 years of service if PF and ESI are covered.

Uma

Hi,

It's a statutory obligation of an employer to their employee. Even though it's paid out only if the employee parts ways after 5 continuous years of service, a liability will have to be captured in your book of accounts as per actuarial calculation.

Shoba

Dear All,

As per the scope of the Gratuity Act of 1972, every factory, shop, or establishment employing 10 persons shall be covered under the Act. Concerning IT companies, they are covered under the Shop and Establishment Act of the respective state, and typically, those employing 10 employees shall also be covered under the Gratuity Act.

The payment of gratuity is governed by the act. An individual who has completed five years of service shall be eligible for gratuity payment, calculated as follows: 15 days' average (divided by 26) of the last drawn basic wages (Basic+DA) for each completed year of service.

The gratuity amount can be calculated using the formula:
Gratuity = [{(Basic+DA)/26} * 15] * completed years of service.

I hope this clarifies the subject matter. For more specific cases, please do not hesitate to reach out.

Mohd. Arif Khan

Hi,

Most of our colleagues have written about the Gratuity Act applicable to industries and shops & establishments in India. This act has a limit of a maximum amount that can be paid. Earlier it was Rs 3,50,000. The limit may have been raised.

Most multinationals do not pay gratuity. They offer something similar called superannuation or severance, which offers one month's salary for each year of completed service. Income tax is applicable as per law.

Cheerio,
Rashmi

Dear Arif,

Do you mean that if there are less than 10 members, gratuity is eligible, then do you say that PF and ESI are not necessary?

Uma