Calculating Gratuity for Daily Wage Workers: How Do You Approach It?

How do we calculate gratuity for daily-rated laborers who are paid a wage per day?

If a daily-rated employee has completed 5 years of continuous service in the facility or in the case of death, then he is eligible for gratuity irrespective of whether he is monthly paid or daily paid. For daily-paid employees, gratuity can be calculated as follows: Gratuity = (Daily rate of wages x 15 days) x No. of years worked in the entity.

Hope this will solve your query.

Regards,
Avinash K.

The opinion of Mr. Avinash is correct as per Section 4(2) of the Payment of Gratuity Act, 1972.

Regards,
Sameer Paranjape, Adv (Labour Law Consultant)
Pune, [Phone Number Removed For Privacy Reasons]

In the case of daily-rated workers, take the average of wages paid to him for the preceding three months of his leaving.

Regards, Madhu.T.K

After 240 days of working in a year in the same establishment, the person shall be treated as a permanent worker. In that case, you need to pay the gratuity as we pay to permanent employees. If I am not wrong, there is no mention of daily wagers needing to pay gratuity.

Regards,
Pardeep

Gratuity Calculation for Tea Garden Workers

I know the gratuity calculation in general cases, but what is the process in tea gardens workers' gratuity calculation? The workers are paid a fixed daily wage with a plucking task. If the worker plucks above the task, then he/she gets an incentive and the full wage (fixed daily wage). However, if he/she plucks below the task, then the disincentive amount is deducted from his/her daily fixed wage.

What is the process of the gratuity calculation in this scenario? When calculating the gratuity amount, should the incentive/disincentive be added or deducted from the gratuity or not?

Kindly advise.

Payment of Fixed Salary or Piece Rate Wages

This is a case of payment of fixed salary or piece rate wages, whichever is higher. The incentive included in the wage component is really wages on a piece rate and is not like any other incentive. Therefore, you can take the average of wages for the three months immediately preceding the day of his retirement or leaving the plantation. While taking the average, you should include the incentive portion since it is a piece rate and can exclude overtime payment, if any. Normally, in piece rate wages, the matter of overtime will not arise.

Regards,
Madhu.T.K

I would like to provide a different perspective on the average salary clause of the Payment of Gratuity Act for three months.

Understanding the Average Salary Clause

As per Section 4, sub-section 2, the average salary of the three-month clause is only applicable to piece-rate employees and not daily-rated employees. Gratuity can be calculated based on the current daily rates of the employee.

Regards,
Avinash K.