As per the proposed wage code, the gratuity calculation for a payout will be based on 50% of an individual's remuneration. Please guide me on whether we should restrict it to a maximum of fifty percent or calculate and pay on actuals if the basic salary is 80% of their total remuneration.
From India, New Delhi
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1From India, New Delhi
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Dear Dixit,
I am not sure where you got the information that for the purpose of calculating gratuity as per the proposed Code on Wages, 2019, 50% of the employee's salary would be taken into account.
In this connection, I would request you to go through the definition of the term "wages" under section 2(88) of the Code on Social Security, 2020, in addition to its section 53(2) under Chapter V, which deals with gratuity.
"Wages" defined under section 2(88) would normally mean all remuneration payable to an employee under the contract of employment, whether by way of salaries, allowances, or otherwise expressed or capable of being expressed in terms of money, and include the components viz., (a) basic pay, (b) dearness allowance, and (c) retaining allowance, if any. But the other components enumerated under sub-clauses (a) to (k) are specifically excluded. However, the first proviso to section 2(88) insists first on a parity of one-half or such other percent as may be notified by the Central Government between the sum of the included components and the sum of the excluded components under sub-clauses (a) to (i) only. If the sum of the sub-clauses (a) to (i) exceeds the parity thus notified, the proviso further insists that the excess amount shall be deemed as remuneration and accordingly added to wages under clause (88).
Section 53(2) of the Code prescribes the formula for the calculation of gratuity, which is the same rate of 15 days' wages last drawn for every completed year of service or part thereof in excess of six months as in section 4(2) of the existing Payment of Gratuity Act, 1972. Explanation 3 to section 53(2) further lays down that in respect of monthly-rated employees, the 15 days' wages shall be calculated by dividing the monthly rate of wages last drawn by 26 and multiplying the quotient by 15, as in the existing PG Act, 1972.
Based on the above, I think that you can decide for yourself.
From India, Salem
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I am not sure where you got the information that for the purpose of calculating gratuity as per the proposed Code on Wages, 2019, 50% of the employee's salary would be taken into account.
In this connection, I would request you to go through the definition of the term "wages" under section 2(88) of the Code on Social Security, 2020, in addition to its section 53(2) under Chapter V, which deals with gratuity.
"Wages" defined under section 2(88) would normally mean all remuneration payable to an employee under the contract of employment, whether by way of salaries, allowances, or otherwise expressed or capable of being expressed in terms of money, and include the components viz., (a) basic pay, (b) dearness allowance, and (c) retaining allowance, if any. But the other components enumerated under sub-clauses (a) to (k) are specifically excluded. However, the first proviso to section 2(88) insists first on a parity of one-half or such other percent as may be notified by the Central Government between the sum of the included components and the sum of the excluded components under sub-clauses (a) to (i) only. If the sum of the sub-clauses (a) to (i) exceeds the parity thus notified, the proviso further insists that the excess amount shall be deemed as remuneration and accordingly added to wages under clause (88).
Section 53(2) of the Code prescribes the formula for the calculation of gratuity, which is the same rate of 15 days' wages last drawn for every completed year of service or part thereof in excess of six months as in section 4(2) of the existing Payment of Gratuity Act, 1972. Explanation 3 to section 53(2) further lays down that in respect of monthly-rated employees, the 15 days' wages shall be calculated by dividing the monthly rate of wages last drawn by 26 and multiplying the quotient by 15, as in the existing PG Act, 1972.
Based on the above, I think that you can decide for yourself.
From India, Salem
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Gratuity calculation.doc