Want to seek clarification regarding the gratuity calculation for an employee who recently resigned from our company

Dear Seniors, I hope this email finds you well. I want to seek clarification regarding the gratuity calculation for an employee who recently resigned from our company. The details are as follows:

Employee’s Name: Mr. A.K.Singh
Total Tenure of Service: 5 years and 3 months
Last Drawn Basic Salary: INR 8257 per month
Could you please guide us on calculating the gratuity amount based on the provided information? We want to ensure that we handle this matter accurately.

Thank you for your assistance.

Hi,

The calculation for Gratuity will be:-

Last drawn salary (Basic+DA) * 15/26 * no of years of service.

Rs.8257 * 15/26 * 5 = Rs.23818

For five years and 3 months' service the employee is entitled to five years' gratuity sinc a fraction of a year more than 6 months could only be rounded to next number, ie, 6 years. The gratuity is equal to 15 days salary for every completed year of service. Average salary for one day is calculated by dividing the monthly wages by 26. Therefore, for an employee whose last drawn salary is Rs 8257, the gratuity will be Rs 23818 calculated as:
8257/26 * 15 (days)* 5(years)

Salary for the purpose of calculation of gratuity means the total salary excluding overtime wages, commission, house rent allowance and similar compensative allowances (allowances paid to compensate certain costs like house rent, travel cost to reach office and back home, meals allowance, education allowance, telephone allowance etc), bonus, employer's contribution towards EPF etc and other similar allowances. Allowances like dearness allowances, special allowance paid to all workers in general without considering any special skill and allowances as per settlement or contract of employment should be included in the gratuity qualifying salary.

In your case the salary mentioned is Rs 8257. I don't think that there will be any employee who has worked for five years who would get just 8257 as salary. Moreover, the minimum wages notified by the government should be more than this. This is called statutory wages. There are court directions that gratuity should be paid at least on the statutory wages fixed by the government.