Gratuity Calculation for MNC Employees: What's the Formula for a 5-Day Workweek?

- How is gratuity calculated for MNC employees who work only 5 days a week? What is the formula?

Any law reference would be appreciated.

Dear Himanshu,

Please note, there is no difference between 5 days or 6 days for calculation. It is only about if a person had worked in the organization for 4 years and 280 days in continuous employment. If yes, then he/she is entitled to the gratuity amount. The calculation formula will be: Current Basic / 26 * 15 * Number of years of Service.

Dear Manoj,

Thank you for your reply.

Regarding the current formula: Basic / 26 * 15 * Number of years of service, this formula is for the companies that operate on a 26-day work schedule. For multinational corporations (MNCs) that have a 22-day work schedule, should the same formula be applied, or should the number 22 be used instead of 26?

Thank you for your clarification.

Best regards

Hi
It is no matter whether the employee works 5 days or 6 days in a week. The gratuity is calculated on Last drawn salary (Basic + DA)/26*15* number of year of service. If the service is 5 years and six months it will be treated as 6 years i.e. The formula is 26 days.
Regards
P.S.Lakshmanan
S. G. Management Services
(PAN INDIA Consultant – Labour Law Compliance,
PF, ESI, P Tax, Benefit Management &
POSH COMPLIANCE) - KOLKATA

Explanation of Gratuity Calculation Under the Payment of Gratuity Act, 1972

I would like you to read the explanation given to Section 4(2) of the Payment of Gratuity Act, 1972. The explanation clearly states that in the case of a monthly-rated employee, the 15 days' wages shall be calculated by dividing the monthly rate of wages last drawn by him by 26 and multiplying the quotient by 15.

Therefore, as far as the formula for the calculation of gratuity under the Act in respect of any monthly-rated employee is concerned, the number of his weekly working days is not relevant. If it has any relevance under the Act, it is only for the purpose of determining continuous service under Section 2-A of the Act. In the case of an employee who is employed in an establishment that works for less than 6 days a week, he is not in continuous service as per Section 2-A(1). However, he should be deemed to be in continuous service if he has actually worked for 190 days in a year or 95 days in a period of 6 months as per clauses (a) and (b) of Section 2-A(2).

Thank you.

Gratuity Calculation for Offshore Employees

Employees working offshore (on ships) work on a 6 months on and 6 months off basis. Thus, their average working days per month are 15. So, according to your logic, they should receive gratuity as Last drawn Basic+DA*15/15*No. of years of service?

These types of ideas do not come to mind when we run our own business.

Manner of Calculating Gratuity

Since September 1972, gratuity has been calculated as Last Drawn Basic+DA*15*No. of years of service / 30. This practice was continued until 1991, and thereafter, according to a new amendment after 19 years, the divisor brought into practice is 26 days.

Regards,
Suresh

How is gratuity calculated for employees who work 5 days a week?

190 days of work where work is conducted 5 days a week as continuous service. The law/act specifies 5 years of service, but individuals guided by any court order cannot be treated as absolute unless the Government confirms it through a Gazette notification.

Calculation: last paid basic [(Basic/26) x 15 x number of years completed service]