Understanding Gratuity: How Do You Calculate Average Wage for Daily Workers in India?

Dear Sir(s), As per Sec. 4(2) of The Gratuity Payment Act, 1972, the gratuity is calculated on the average wage drawn and not on the last wage drawn. Kindly advise on how to calculate the Average Wage of a Daily Rated Worker. For example, let's suppose a worker's daily wage is Rs. 200/- if he was present on all working days during the last 3 months before he retires on 31.03.2022.

Illustrative replies are appreciated.

With kind regards,

Mahesh Khandelwal

Location: Calcutta, India

Tags: gratuity payment, payment act, Country-India, City-India-Calcutta

To calculate the average wage of a Daily Rated Worker for the purpose of gratuity payment, you need to follow a straightforward calculation method based on the provisions of the Gratuity Payment Act, 1972. Here's a practical guide to help you determine the average wage:

Step-by-Step Guide:

🔹 Step 1: Calculate the total earnings of the worker for the last 3 months before retirement. In this case, if the daily wage is Rs. 200/- and the worker was present on all working days, multiply Rs. 200 by the total number of working days in 3 months.

🔹 Step 2: Determine the total number of working days in the last 3 months. If there are any leave days or non-working days, exclude them from the calculation.

🔹 Step 3: Divide the total earnings by the total number of working days to obtain the average daily wage.

🔹 Step 4: The Average Wage is calculated by considering the average daily wage over the specified period, as required by the Gratuity Payment Act, 1972.

🔹 Note: Ensure accurate record-keeping of attendance and wages to calculate the average wage correctly.

By following these steps and adhering to the provisions of the Gratuity Payment Act, you can accurately determine the Average Wage of a Daily Rated Worker for gratuity calculation purposes.