Hi all, I need a clarification for gratuity computation. The scenario is as follows: An employee joined on 10th January 2005 and met with an accident on 30th April 2012. He resigned on 15th July 2012. So, when computing his gratuity, there is a split: salary up to 30th April 2012 (Rs. 15,000) and up to 15th July (Rs. 9,500). How should his gratuity be calculated? Is there a need to calculate the last 3 months' gratuity since, when rounding it, it maps to 0? Regards, Sivajith S.
From India, Mumbai
Acknowledge(0)
Amend(0)
5From India, Mumbai
Acknowledge(0)Amend(0)
Gratuity Payment Under the Payment of Gratuity Act 1972
The Payment of Gratuity Act 1972 states that gratuity shall be payable to an employee upon the termination of employment after he has rendered continuous service for not less than five years. It is provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement.
For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days' wages based on the rate of wages last drawn by the employee concerned.
In this case, you are required to calculate the gratuity based on the last drawn wages. The employee resigned on 15.07.2012, and gratuity has to be calculated based on this date. I would like to know how his salary decreased from Rs. 15,000/- to Rs. 9,000/- and what will be his basic and DA (if applicable).
Regards.
From India, Mumbai
Acknowledge(2)Amend(0)
The Payment of Gratuity Act 1972 states that gratuity shall be payable to an employee upon the termination of employment after he has rendered continuous service for not less than five years. It is provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement.
For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days' wages based on the rate of wages last drawn by the employee concerned.
In this case, you are required to calculate the gratuity based on the last drawn wages. The employee resigned on 15.07.2012, and gratuity has to be calculated based on this date. I would like to know how his salary decreased from Rs. 15,000/- to Rs. 9,000/- and what will be his basic and DA (if applicable).
Regards.
From India, Mumbai
Acknowledge(2)Amend(0)
The condition is when he joined, his designation was 'A', and after that, he couldn't do the same work due to any reason, and the company changed his designation to 'B'. Now you may be clear.
Regards,
Sivajith S.
From India, Mumbai
Acknowledge(0)Amend(0)
Regards,
Sivajith S.
From India, Mumbai
Acknowledge(0)Amend(0)
In this case, you may calculate his gratuity based on his last drawn basic + DA.
As per DOJ & DOL, he worked for 7 years, 6 months, and 5 days, which rounds up to 8 years. If we consider his last drawn basic + DA as Rs. 9,000/-, the calculated amount will be Rs. 9000/26*15*8 = Rs. 41,538/-.
Hope this helps you.
From India, Mumbai
Acknowledge(0)Amend(0)
As per DOJ & DOL, he worked for 7 years, 6 months, and 5 days, which rounds up to 8 years. If we consider his last drawn basic + DA as Rs. 9,000/-, the calculated amount will be Rs. 9000/26*15*8 = Rs. 41,538/-.
Hope this helps you.
From India, Mumbai
Acknowledge(0)Amend(0)
I understand from Sivajith's query that after meeting with an accident, due to temporary disablement, his salary might be reduced to 60% of his wages. This is why his salary is $9,000 instead of $15,000 at the time of resignation, if I am not mistaken.
So please provide clarity based on the above point. If an employee's actual salary is $15,000 and, let's say his service is 5 years, and immediately after 3 months, he met with an accident, resulting in his salary becoming 60% of his current salary, which equals $9,000, and he resigned after 5 years and 3 months.
Now the question is, is the Gratuity calculation either $9,000/26*15*5 years? or $15,000/26*15*5 years?
From India, Visakhapatnam
Acknowledge(0)Amend(0)
So please provide clarity based on the above point. If an employee's actual salary is $15,000 and, let's say his service is 5 years, and immediately after 3 months, he met with an accident, resulting in his salary becoming 60% of his current salary, which equals $9,000, and he resigned after 5 years and 3 months.
Now the question is, is the Gratuity calculation either $9,000/26*15*5 years? or $15,000/26*15*5 years?
From India, Visakhapatnam
Acknowledge(0)Amend(0)
what ever the case it may be.......as per the payment of Gratuity Act, the Gratuity amount will be calculated based on the last drawn basic+DA irrespective of the changes of the salary.
From India, Mumbai
Acknowledge(0)Amend(0)
From India, Mumbai
Acknowledge(0)Amend(0)
Farmula for gratuity calculation as per Gratuity Act -1972 is as : Basic ( last drawn) + DA ( if any)*15*completed service years/26 = gratuity amount . Pawan Thakur
From India, Shimla
Acknowledge(0)Amend(0)
From India, Shimla
Acknowledge(0)Amend(0)
Hi Dear Sivajith, You should calculate Gratuity on 9000/-. not on 15000/-. Last drawn salary ( Basic + DA) Biju
From India, Calicut
Acknowledge(0)Amend(0)
From India, Calicut
Acknowledge(0)Amend(0)
Gratuity Calculation Query
If an employee has worked for 5 years, 7 months, and 3 days, how should we calculate gratuity? Do we consider the service in a round figure or based on actual service?
(Basic + DA) / 26 x 15 days x 5 years, 7 months, and 3 days
Please assist with the calculation.
Regards,
Rahul
From India, Pune
Acknowledge(1)
Amend(0)
If an employee has worked for 5 years, 7 months, and 3 days, how should we calculate gratuity? Do we consider the service in a round figure or based on actual service?
(Basic + DA) / 26 x 15 days x 5 years, 7 months, and 3 days
Please assist with the calculation.
Regards,
Rahul
From India, Pune
Acknowledge(1)Amend(0)
15 days salary for every completed year of service componenet for grt calculation is basic +da=vda madhavan hr rane evl
From India, Chennai
Acknowledge(0)Amend(0)
From India, Chennai
Acknowledge(0)Amend(0)
Hi Sivajith, The condition is when he joined, his designation was 'A', and after that, he couldn't do the same work due to any reason, so the company changed his designation to 'B'. Now you may be clear...
You can't reduce the BASIC & DA at any point of employment once it's given and after processing the first month's salary. It's against the law. Anyhow, it's an issue of the calculation of Gratuity. Take the last drawn Salary (Salary = BASIC + DA) and (last drawn salary = Actual salary not earned salary). You will be on the safe side unless the employee objects or challenges the reduction of Basic & DA.
Regards, Sivajith S.
From India, Bangalore
Acknowledge(0)Amend(0)
You can't reduce the BASIC & DA at any point of employment once it's given and after processing the first month's salary. It's against the law. Anyhow, it's an issue of the calculation of Gratuity. Take the last drawn Salary (Salary = BASIC + DA) and (last drawn salary = Actual salary not earned salary). You will be on the safe side unless the employee objects or challenges the reduction of Basic & DA.
Regards, Sivajith S.
From India, Bangalore
Acknowledge(0)Amend(0)
It is unfortunate that he would be a loser through no fault of his own, but the law is the law. It clearly states that the last drawn salary is to be taken into consideration. However, if his new salary of ₹9,000 is a result of his fresh appointment on a lower scale of pay, then by ignoring this period of service, you may pay gratuity for the period he was drawing ₹15,000 if otherwise eligible.
From India, New Delhi
Acknowledge(0)Amend(0)
From India, New Delhi
Acknowledge(0)Amend(0)
Please read Section 4(4) of the Payment of Gratuity Act. You have to calculate gratuity on ₹15,000 for his service up to the date of disablement and on ₹9,000 for the services after the disablement if you have reduced his wages.
Regards,
Varghese Mathew
[Phone Number Removed For Privacy Reasons]
From India, Thiruvananthapuram
Acknowledge(1)
Amend(0)
Regards,
Varghese Mathew
[Phone Number Removed For Privacy Reasons]
From India, Thiruvananthapuram
Acknowledge(1)Amend(0)
Hi, Thanks, Varghese Mathew. One more doubt: if the employee worked for a salary of 15,000 for 4 years and 7 months and for 9,000 for 3 months, how do we calculate his gratuity? Is there any rounding off involved?
Regards, Sivajith S.
From India, Mumbai
Acknowledge(1)Amend(0)
Regards, Sivajith S.
From India, Mumbai
Acknowledge(1)Amend(0)
Hi Varghese Mathew, so rounded 4y 7 months to 5 years and 3 months to 0 years...right? Regards, Sivajith S.
From India, Mumbai
Acknowledge(1)Amend(0)
From India, Mumbai
Acknowledge(1)Amend(0)
Understanding Gratuity Computation for Disabled Employees
If you go through the Gratuity Act, you can find the following point:
For the purpose of computing the gratuity payable to an employee who is employed after his disablement on reduced wages, his wages for the period preceding his disablement shall be taken to be the wages received by him during that period. His wages for the period subsequent to his disablement shall be taken to be the wages as so reduced.
Regards,
From India, Visakhapatnam
Acknowledge(0)Amend(0)
If you go through the Gratuity Act, you can find the following point:
For the purpose of computing the gratuity payable to an employee who is employed after his disablement on reduced wages, his wages for the period preceding his disablement shall be taken to be the wages received by him during that period. His wages for the period subsequent to his disablement shall be taken to be the wages as so reduced.
Regards,
From India, Visakhapatnam
Acknowledge(0)Amend(0)CiteHR is an AI-augmented HR knowledge and collaboration platform, enabling HR professionals to solve real-world challenges, validate decisions, and stay ahead through collective intelligence and machine-enhanced guidance. Join Our Platform.
Payment of Gratuity Act, 1972 & The Rules.ppt
THE PAYMENT OF GRATUITY ACT 1972.doc