Confused About Gratuity Calculation: Which Basic Salary Should Be Used?

I have a question to help my friend. Please, if anyone can help. If his basic salary is INR 11,750 and he has worked for a company for 7 years and 8 months and has resigned from the company on 21st November, then what will be his gratuity amount payable?

The company where he has worked has computed his basic salary as INR 8,225/- based on 21 days in November 2019, after which he resigned, and calculated the last drawn basic for gratuity payment.

Now, my question is: will the last drawn basic salary for the gratuity calculation be Rs. 11,750/- or Rs. 8,225/-?

I have a question to help my friend. Please, if anyone can help. If his basic salary is INR 11,750 and he has worked for a company for 7 years and 8 months and has resigned from the company on the 21st of November, then what will be his gratuity amount payable?

The company where he has worked has computed his basic salary as INR 8,225 based on 21 days in November 2019, after which he resigned, and calculated the last drawn basic for gratuity payment.

Now, my question is: will the last drawn basic, on which the gratuity calculation is to be made, be Rs. 11,750 or Rs. 8,225?

The basic salary for gratuity calculation is Rs. 11,750/- and not Rs. 8225/-. The Act states Last Drawn Salary and not Last Earned Salary.

Thank you.

Hi,

The actual last drawn basic + DA salary to be considered for Gratuity calculation is Rs. 11,750 as per your statement. Your friend's Gratuity eligibility will be Rs. 54,231 in total. 7.8 years should be rounded off to 8 years for calculation purposes.

In my opinion, it is not only the last drawn basic salary, i.e., Rs. 11,750 in the given case, but the entire salary including allowances which are payable as per the contract of employment that should be considered for calculating gratuity. This is because the salary for the purpose of payment of gratuity means the total amount payable to an employee as per the contract of employment and not just based on the basic salary. Please follow the link below:

[Madhu T K: Payment of Gratuity and Gratuity Qualifying Salary](http://madhu-t-k.blogspot.com/2019/10/payment-of-gratuity-and-gratuity.html)

Is gratuity applicable to CTC employees?

Thank you for your question. Gratuity is a statutory benefit provided to employees in India as per the Payment of Gratuity Act, 1972. It is applicable to all employees, including those covered under the Cost to Company (CTC) structure. Gratuity is calculated based on the employee's tenure of service and last drawn salary.

If you have any further queries regarding gratuity or any other employment benefits, feel free to ask.

What is CTC for employees?

There is no such category of employee under any labor law. While some employers have chosen to incorporate all legally required contributions to employees from the month of their joining until retirement as part of the labor/personnel cost, thus referring to it as the cost to the company, this does not imply that these individuals are not employees and are therefore exempt from labor laws.

If by "CTC employee" you mean an employee whose remuneration for work, as stated in the offer letter, includes contributions payable by the employer towards PF, Bonus, Gratuity, etc., then I would assert that these individuals are indeed employees and are covered by the Payment of Gratuity Act. Regardless of the basic pay specified in their offer letters, the total fixed salary as per the offer letter, which is used to determine their pay for a day when they take a leave without pay, will form the basis for calculating gratuity.

You mean FTC employees, I believe. CTC stands for the cost to the company, whereas FTC refers to Fixed Term Contract employees. Now, regarding your query about whether FTC employees are eligible for gratuity, please find enclosed herewith the notification for your kind perusal.