Gratuity Calculation Dilemma: Will My Resignation Affect Payment Based on New or Old Salary?

Hi, I work in a well-known software company and recently received a promotion with a significant salary increase, effective from March 15, 2021. Our salary cycles run from the 15th of one month to the 15th of the next month. For example, my salary for the period from March 15th to April 15th is paid out on April 30th.

I am considering resigning from my current position and may not be able to serve the complete notice period of 60 days. However, my new organization has agreed to compensate for the shortfall through a notice period buyout.

Gratuity Payment Calculation

I have a question regarding my gratuity payment. Will it be calculated based on my new salary or my old salary? I have not yet started receiving the increased salary, and I may not receive it at all if I resign, as my salary might be withheld and paid out only as part of the final settlement.

Please advise on how my gratuity will be calculated in this scenario. Thank you.

Gratuity Payment Calculation

The question of gratuity payment will be calculated based on your new salary, regardless of your relieving date, as your new salary will be effective from 15th March.

In private companies, your employer may withdraw your salary hike once you resign. If you are fortunate, you may receive your final settlement at your revised salary.

Thanks for your response. They cannot withdraw the hiked salary as I have the new offer letter, and both the company and I have already accepted it. My increased grade is already being reflected in the company HR system (Workday).

Effective Date of Promotion and Salary Considerations

Legally speaking, the effective date of promotion would be the promotee's joining in the new post, which is admittedly March 15, 2021. Therefore, whether he drew the salary on the revised scale applicable to the higher post is irrelevant if he resigns after his promotion. The question of a buy-out of the notice period arises only when the person is unable to serve a part or the entire notice period. In either case, his resignation is effective from his actual date of relieving, which must certainly be later than his promotion date. Hence, the salary payable for the higher post is the last drawn salary, both for the purposes of buy-out and gratuity.

Withdrawal of Salary Hike Due to Resignation

Withdrawal of a salary hike due to promotion on account of the subsequent resignation of the promotee will not be legally correct, as the promotion has already been acted upon on the date of termination due to resignation.