Dear Sir, I worked in a private limited company from 2014 to 2020 for a period of 6 years in Delhi with the post of clerical staff/stenographer/back office coordinator. After leaving the service, I received gratuity of Rs. 108,346 based on the last monthly gross salary of Rs. 31,300. The calculation was done as follows: (31,300/26) x 15 x 6.
However, according to the rule, gratuity should be calculated based on the basic salary or the last pay drawn.
In 2018, my basic salary was Rs. 28,000 plus other components totaling Rs. 30,000. But in 2019, the basic salary was reduced to Rs. 16,000 with all other components totaling Rs. 31,300.
The company is now requesting a refund of the excess amount in gratuity that I received based on the basic salary of Rs. 16,000.
I am unsure if the basic salary can be reduced once fixed. Are there any guidelines for this in government or private service? Is there a notification or government order to support this point?
From discussions with colleagues, I learned that the basic salary for back-office/clerical staff is Rs. 19,000 per month, not Rs. 16,000.
I seek clarification on the possible solution or the amount to be returned.
Thank you,
VDS
From India, New Delhi
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However, according to the rule, gratuity should be calculated based on the basic salary or the last pay drawn.
In 2018, my basic salary was Rs. 28,000 plus other components totaling Rs. 30,000. But in 2019, the basic salary was reduced to Rs. 16,000 with all other components totaling Rs. 31,300.
The company is now requesting a refund of the excess amount in gratuity that I received based on the basic salary of Rs. 16,000.
I am unsure if the basic salary can be reduced once fixed. Are there any guidelines for this in government or private service? Is there a notification or government order to support this point?
From discussions with colleagues, I learned that the basic salary for back-office/clerical staff is Rs. 19,000 per month, not Rs. 16,000.
I seek clarification on the possible solution or the amount to be returned.
Thank you,
VDS
From India, New Delhi
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You may reply to them by referring to the term "wages" as defined in Section 2(s) of the Payment of Gratuity Act 1972, which reads as follows:
“Wages” means all emoluments earned by an employee while on duty or on leave in accordance with the terms and conditions of his employment, and which are paid or payable to him in cash. It includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages, and any other allowance.
So, first of all, gratuity is not to be calculated on the basis of basic pay alone but includes DA as well as any other emolument paid in cash. It specifically excludes bonus, commission, HRA, OT wages, and other allowances.
Please factor in the amount of Rs. 31,300 you were receiving as a monthly salary and see where you stand.
As regards the reduction of basic pay, it cannot be reduced except as a punishment. However, that has not been the case. You accepted the total package considering the gains in the process, so you cannot now complain against it. There is a legal principle that you cannot agree and disagree at the same time.
From India, Mumbai
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1593“Wages” means all emoluments earned by an employee while on duty or on leave in accordance with the terms and conditions of his employment, and which are paid or payable to him in cash. It includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages, and any other allowance.
So, first of all, gratuity is not to be calculated on the basis of basic pay alone but includes DA as well as any other emolument paid in cash. It specifically excludes bonus, commission, HRA, OT wages, and other allowances.
Please factor in the amount of Rs. 31,300 you were receiving as a monthly salary and see where you stand.
As regards the reduction of basic pay, it cannot be reduced except as a punishment. However, that has not been the case. You accepted the total package considering the gains in the process, so you cannot now complain against it. There is a legal principle that you cannot agree and disagree at the same time.
From India, Mumbai
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Dear colleague, The Gratuity Act has defined what "wages" mean for calculating gratuity as already referred to by the learned colleague. The gratuity is to be calculated based on 'last drawn wages' at the time of cessation of employment and not on basic wages alone.
Regards,
Vinayak Nagarkar
HR and Employee Relations Consultant
From India, Mumbai
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Regards,
Vinayak Nagarkar
HR and Employee Relations Consultant
From India, Mumbai
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Employee Gratuity Rights
In fact, the right of the employee to receive gratuity, which exceeds the statutory gratuity provided in the Payment of Gratuity Act 1972, is protected within the Act itself. Therefore, in my opinion, once the employer has paid the gratuity on gross salary, it constitutes better terms for the payment of gratuity. The employer is now legally estopped from asking for the excess amount back from you.
Regards,
S. K. Mittal
[Phone Number Removed For Privacy-Reasons]
From India, Faridabad
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In fact, the right of the employee to receive gratuity, which exceeds the statutory gratuity provided in the Payment of Gratuity Act 1972, is protected within the Act itself. Therefore, in my opinion, once the employer has paid the gratuity on gross salary, it constitutes better terms for the payment of gratuity. The employer is now legally estopped from asking for the excess amount back from you.
Regards,
S. K. Mittal
[Phone Number Removed For Privacy-Reasons]
From India, Faridabad
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Gratuity calculation.doc
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