Concerned About Gratuity? How New Salary Rules Might Affect Your Benefits

Hello, I left my previous organization in 2023 after serving them for 11 years, 1 month, and 30 days. The last drawn salary was 74 LPA. The basic salary, as per the salary slip, was ₹50,000 per month. The gratuity amount I received is based on the basic salary mentioned in the salary slip.

Understanding New Salary Rules

However, I now understand that, as per the new rules from April 2022, the basic salary has to be 50% of the total salary, though I am not exactly sure of the details. It seems it should be more than what the company provided. What can be done? How should I proceed?

Gratuity Calculation Under the New Labour Code

The wages as per the new Labour Code(s) are misleading. At the same time, these codes are not yet in force. Since your date of accrual of gratuity is in 2023, the gratuity as per the present Payment of Gratuity Act will be applicable to you. Under the current system, gratuity should be calculated on the total emoluments, excluding allowances like overtime allowance, commission, house rent allowance, and similar other allowances. "Other allowances" refer to allowances similar to these excluded ones. The excluded allowances are paid under certain conditions, such as overtime allowance for overtime work, commission based on results like sales, and house rent allowance only for those residing in leased accommodation. It is not paid to all employees or those residing in their own houses or whose spouses receive HRA.

Moreover, nowhere in the contract of employment will the amounts of these allowances be available. In the appointment order, the amount of overtime wages, commission, or HRA will not be specified. Therefore, all components of salary that are prefixed and available in the contract of employment are considered salary for the purpose of computing gratuity. It is not just basic pay and dearness allowance that will be considered for the computation of gratuity.

Change in Gratuity Rule

As per the Act, employees are entitled to receive gratuity after 5 years of continuous work in the same entity. However, according to the New Wage Code 2022, employees will be entitled to receive gratuity even if they are employed for just one year. The main point here is that our member from Jaipur left the organization during 2023, and the implementation of the New Labour Code, though passed in 2022, had its date of implementation deferred.

It appears that the government's plan is to roll out the labour codes from the beginning of the next fiscal year on April 1, 2025, to sync it with the business cycle. Therefore, payment of gratuity as per the revised scheme does not currently apply.