Greetings to All, I hope everyone is safe and staying at home. I seek clarifications on the following:
Calculation of Gratuity Amount for Retirement
1. One of our employees is retiring in May 2020.
2. Due to the current situation, our management has decided to reduce all employees' salaries by 10%.
3. In the case of the retiring employee, for example, his present basic salary of Rs. 20,000 will be reduced to Rs. 18,000 (salary revision given in April 2019).
4. He has served for 25 years.
5. At the time of calculating gratuity, should we consider the basic salary as Rs. 20,000 or Rs. 18,000?
I seek your valuable guidance on this matter.
Thank you.
From India
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1Calculation of Gratuity Amount for Retirement
1. One of our employees is retiring in May 2020.
2. Due to the current situation, our management has decided to reduce all employees' salaries by 10%.
3. In the case of the retiring employee, for example, his present basic salary of Rs. 20,000 will be reduced to Rs. 18,000 (salary revision given in April 2019).
4. He has served for 25 years.
5. At the time of calculating gratuity, should we consider the basic salary as Rs. 20,000 or Rs. 18,000?
I seek your valuable guidance on this matter.
Thank you.
From India
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How Gratuity is Calculated
The gratuity amount depends on the tenure of service and the last drawn salary. It is calculated according to this formula: Last drawn salary (basic salary plus dearness allowance) multiplied by the number of completed years of service, then multiplied by 15/26. According to this formula, a time period of over six months or more is considered as one year.
With a salary of Rs 20,000 (without dearness allowance), it works out to approximately Rs 288,000. With dearness allowance, the amount will increase. If you reduce his salary to Rs 18,000, he will receive only approximately Rs 175,000. It would be unfair to decrease his salary and provide him with less gratuity. In the context of directives passed regarding COVID-19 and employees, such a curtailment will be questionable.
From India, Pune
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The gratuity amount depends on the tenure of service and the last drawn salary. It is calculated according to this formula: Last drawn salary (basic salary plus dearness allowance) multiplied by the number of completed years of service, then multiplied by 15/26. According to this formula, a time period of over six months or more is considered as one year.
With a salary of Rs 20,000 (without dearness allowance), it works out to approximately Rs 288,000. With dearness allowance, the amount will increase. If you reduce his salary to Rs 18,000, he will receive only approximately Rs 175,000. It would be unfair to decrease his salary and provide him with less gratuity. In the context of directives passed regarding COVID-19 and employees, such a curtailment will be questionable.
From India, Pune
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