I have recently joined HR in a small company, and we want to initiate gratuity. Can you please guide me with the rules and regulations and gratuity eligibility?
From India, Bengaluru
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1From India, Bengaluru
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Gratuity is a statutory benefit paid to employees who have rendered continuous service for at least five years. It is a mark of recognition for the employee's service. The benefit is mandated by the Payment of Gratuity Act, 1972 in India.
Eligibility for Gratuity
- An employee becomes eligible for gratuity after completing five years of continuous service in the same organization.
- Part-time, contractual, or seasonal employees are also eligible, provided they complete five years of service.
- The employee should not have been terminated due to riotous or disorderly conduct or any act of violence on his part, or any offense involving moral turpitude.
Calculation of Gratuity
- The gratuity amount is calculated based on the last drawn salary (basic salary plus dearness allowance) of the employee and the tenure of service. The formula used is: (Last drawn salary x 15/26) x number of years of service.
Rules and Regulations
- As per the Payment of Gratuity Act, if an employee's service is terminated due to death or disablement, the five-year requirement is waived off.
- The employer has the right to reject the payment of gratuity if the employee has been terminated due to his/her misbehavior.
- Gratuity received by government employees is exempt from taxation. For non-government employees, the amount of gratuity received is tax-exempt up to a certain limit as defined by the Income Tax Act.
- The employer must inform the employee about the amount of gratuity due to him/her as soon as it becomes payable.
Starting a gratuity benefit in your organization is a commendable initiative. Make sure to communicate the eligibility and calculation method clearly to your employees. You might also want to consider getting an insurance product like a group gratuity plan to manage this liability better.
For more details, please refer to the Payment of Gratuity Act, 1972 http://egazette.nic.in/WriteReadData...0007-58930.pdf and the Income Tax Act.
From India, Gurugram
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Eligibility for Gratuity
- An employee becomes eligible for gratuity after completing five years of continuous service in the same organization.
- Part-time, contractual, or seasonal employees are also eligible, provided they complete five years of service.
- The employee should not have been terminated due to riotous or disorderly conduct or any act of violence on his part, or any offense involving moral turpitude.
Calculation of Gratuity
- The gratuity amount is calculated based on the last drawn salary (basic salary plus dearness allowance) of the employee and the tenure of service. The formula used is: (Last drawn salary x 15/26) x number of years of service.
Rules and Regulations
- As per the Payment of Gratuity Act, if an employee's service is terminated due to death or disablement, the five-year requirement is waived off.
- The employer has the right to reject the payment of gratuity if the employee has been terminated due to his/her misbehavior.
- Gratuity received by government employees is exempt from taxation. For non-government employees, the amount of gratuity received is tax-exempt up to a certain limit as defined by the Income Tax Act.
- The employer must inform the employee about the amount of gratuity due to him/her as soon as it becomes payable.
Starting a gratuity benefit in your organization is a commendable initiative. Make sure to communicate the eligibility and calculation method clearly to your employees. You might also want to consider getting an insurance product like a group gratuity plan to manage this liability better.
For more details, please refer to the Payment of Gratuity Act, 1972 http://egazette.nic.in/WriteReadData...0007-58930.pdf and the Income Tax Act.
From India, Gurugram
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Payment of Gratuity Act, 1972 & The Rules.ppt
THE PAYMENT OF GRATUITY ACT 1972.doc