Hello,
The Act says that you need to calculate gratuity AT-LEAST on basis on basic salary. However there is nothing stopping the employer in calculating the gratuity on the basis of Basic salary AND any other allowance.
Also I'm sure that if you are providing gratuity, you would have got the gratuity plan's actuarial valuation done. Please check with the actuary he would have already done the required calculation or at least help you in it. If you need any help in the actuarial valuation, please let me know.
Thank
Ravi
From India, Delhi
2The Act says that you need to calculate gratuity AT-LEAST on basis on basic salary. However there is nothing stopping the employer in calculating the gratuity on the basis of Basic salary AND any other allowance.
Also I'm sure that if you are providing gratuity, you would have got the gratuity plan's actuarial valuation done. Please check with the actuary he would have already done the required calculation or at least help you in it. If you need any help in the actuarial valuation, please let me know.
Thank
Ravi
From India, Delhi
Dear Mr Atul,
In the year 1987 , the payment of gratuity act was amended and few new sections and sub-sections were inserted in the act.
By inserting sub sectin 4.a the Payment of Gratuity (Amendment) Act, 1987 has prescribed provisions for compulsory insurance for employer’s liability for payment towards the gratuity under the Act from the Life Insurance Corporation of India establishment under the Life Insurance Corporation of India Act,1956 or any other prescribed Insurer.
Now its not at will of the employer to obtain or not to obtain an insurance ploicy.
As of now employer has only two options available 1.) Obtain a gratuity insurance policy from a prescribed prescribed insurer or 2.) Have its own approved gratuity fund with composition of the Board of Trustees of the gratuity fund.
Regards,
Kamal
From India, Pune
In the year 1987 , the payment of gratuity act was amended and few new sections and sub-sections were inserted in the act.
By inserting sub sectin 4.a the Payment of Gratuity (Amendment) Act, 1987 has prescribed provisions for compulsory insurance for employer’s liability for payment towards the gratuity under the Act from the Life Insurance Corporation of India establishment under the Life Insurance Corporation of India Act,1956 or any other prescribed Insurer.
Now its not at will of the employer to obtain or not to obtain an insurance ploicy.
As of now employer has only two options available 1.) Obtain a gratuity insurance policy from a prescribed prescribed insurer or 2.) Have its own approved gratuity fund with composition of the Board of Trustees of the gratuity fund.
Regards,
Kamal
From India, Pune
Hi Kamal, I don’t think that the sub section that you are referring to has been notified. In case you have any updated information please do share it with all of us Thanks ravi
From India, Delhi
From India, Delhi
@ ravi,
If you have not updated yourself it does not mean the said amendment has not been notified. This amendment is effective from 1-10-1987.
plz visit About India Code Updated Acts (Govt of India website) to get the details of the all updated Acts and Laws including payment of Gratuity Act 1972
From India, Pune
If you have not updated yourself it does not mean the said amendment has not been notified. This amendment is effective from 1-10-1987.
plz visit About India Code Updated Acts (Govt of India website) to get the details of the all updated Acts and Laws including payment of Gratuity Act 1972
From India, Pune
Dear Sasikumar,
I am working in an ITES company and We are hardly like 8 yrs old Company. Till date we have not registered our company under the Gratuity act. Kindly guide me the procedure and also guide whom we need to reach for the same. And also guide me shall we go head with any insurance company like group gratuity policy. If we are taking a policy does it fullfil the registration process under the act.
Regards,
Karthik. D
9884153998
From India, Madras
I am working in an ITES company and We are hardly like 8 yrs old Company. Till date we have not registered our company under the Gratuity act. Kindly guide me the procedure and also guide whom we need to reach for the same. And also guide me shall we go head with any insurance company like group gratuity policy. If we are taking a policy does it fullfil the registration process under the act.
Regards,
Karthik. D
9884153998
From India, Madras
Hi Vaishali,
Thanks for your compliments!
For this clarification, please let me know the employee's cadre. because if his wages are being defined under the Payment of Wages Act and The minimum wages Act, his wages will be included Basic + DA (Special Allowance as declared by Govt). So both component should be considered for calculating the Gratuity.
In some salary components, we may not have special allowance (DA) as a seperate field, but in such case, you need to check that total Basic you are paying must not be less than the minimum wages i.e. Basic + Special Allownace (DA) as per the Govt notification and if the Basic you are paying is higher than the minimum wages then there is no need to consider the other allownace in addition to Basic for Gratuity calculation.
However, considering the benefits to employees, it is good that you have considered Basic + Other allowance and defined a standards benchmark for Gratuity calculation for your organisation, whichever cadre of employee may be.
Regards,
Atul S Malve
Manager- HR & Admin
From India, Sholapur
Thanks for your compliments!
For this clarification, please let me know the employee's cadre. because if his wages are being defined under the Payment of Wages Act and The minimum wages Act, his wages will be included Basic + DA (Special Allowance as declared by Govt). So both component should be considered for calculating the Gratuity.
In some salary components, we may not have special allowance (DA) as a seperate field, but in such case, you need to check that total Basic you are paying must not be less than the minimum wages i.e. Basic + Special Allownace (DA) as per the Govt notification and if the Basic you are paying is higher than the minimum wages then there is no need to consider the other allownace in addition to Basic for Gratuity calculation.
However, considering the benefits to employees, it is good that you have considered Basic + Other allowance and defined a standards benchmark for Gratuity calculation for your organisation, whichever cadre of employee may be.
Regards,
Atul S Malve
Manager- HR & Admin
From India, Sholapur
Dear seniors,
I came to know from my senior that any employee who has not completed 5 years service in the same company, he is not eligible for getting Gratuity, management need not to pay. (We are having Gratuity Policy through LIC)
Is it true ? please clarify
Regards,
krishna
From India, Madras
I came to know from my senior that any employee who has not completed 5 years service in the same company, he is not eligible for getting Gratuity, management need not to pay. (We are having Gratuity Policy through LIC)
Is it true ? please clarify
Regards,
krishna
From India, Madras
Hi Krishna,
As per The Payment of Gratuity Act 1972, the employee who have completed his contineous service not less than five years, will be eligible for Gratuity @ 15 days for every completed year of service. Accordingly, the emplyee who has not completed his service less than 5 years will not be eligible for Gratuity, even though, the gratuity payable is covered under any insurance policy or payable directly from employer.
Regards,
Atul S Malve
Manager- HR & Admin
From India, Sholapur
As per The Payment of Gratuity Act 1972, the employee who have completed his contineous service not less than five years, will be eligible for Gratuity @ 15 days for every completed year of service. Accordingly, the emplyee who has not completed his service less than 5 years will not be eligible for Gratuity, even though, the gratuity payable is covered under any insurance policy or payable directly from employer.
Regards,
Atul S Malve
Manager- HR & Admin
From India, Sholapur
Sub- Gratuity
Dear karthik
Sec.4-A of the Gartuity Act 1972 requires an establishment to register itself with the Controlling Authority.However sub-section(3) of Sec.4-A makes it obligatory for the employer (excepting centarl or state governemnt undertakings) to obtain Insurance so as to enable the employer to discharge his liability to pay gratuity to the employees.
An employer can have it's own gratuity fund with better terms than the gratuity envisaged under the Act or at least with terms not less favourable than the gratuity envisaged under the Act by seeking exemption from the Act under Sec.(5).In that event Sec.4-A also exempts establishments thus exempted from obtaining insurance cover.
B.Saikumar
HR & labour Law Consultant
Chipinbiz Consultancy Pvt.ltd
Mumbai
022-28324234
From India, Mumbai
Dear karthik
Sec.4-A of the Gartuity Act 1972 requires an establishment to register itself with the Controlling Authority.However sub-section(3) of Sec.4-A makes it obligatory for the employer (excepting centarl or state governemnt undertakings) to obtain Insurance so as to enable the employer to discharge his liability to pay gratuity to the employees.
An employer can have it's own gratuity fund with better terms than the gratuity envisaged under the Act or at least with terms not less favourable than the gratuity envisaged under the Act by seeking exemption from the Act under Sec.(5).In that event Sec.4-A also exempts establishments thus exempted from obtaining insurance cover.
B.Saikumar
HR & labour Law Consultant
Chipinbiz Consultancy Pvt.ltd
Mumbai
022-28324234
From India, Mumbai
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