Dear All Seniors,
Please help me in following gratuity matter.
1) As per the Act for the calculation of gratuity you need to take last Basic + D.A. amount. But in our salary structure we don’t have D.A. Component, so instead of D.A.we are taking other allowances component (which is very high figure than other components , and management is also ready for that.) Now my questing is, the method which we are using by taking Basic + other allowance is correct ?
2) One of our employee ( Top Management) is completed his almost 8 years in our company ( still he is working with us )when he will leave the company he will be eligible to get his gratuity from company. At this moment his Basic is Rs. 2,00,250 and other allowance is Rs. 101752, that means the gratuity he will receive Rs. 13,93,855 (200250+101752*8*15/26)as per the act the maximum limit of gratuity is Rs. 10 lacs. Now my question how much amount of gratuity he will get if he leave the company – Rs. 10 lacs or Rs.13,93,855 ? If only Rs. 10 lacs then what about the balance Rs. 3,93,855/-?
Waiting for your valuable reply.
Thanks & Regards
Vaishali
From India, Mumbai
3Please help me in following gratuity matter.
1) As per the Act for the calculation of gratuity you need to take last Basic + D.A. amount. But in our salary structure we don’t have D.A. Component, so instead of D.A.we are taking other allowances component (which is very high figure than other components , and management is also ready for that.) Now my questing is, the method which we are using by taking Basic + other allowance is correct ?
2) One of our employee ( Top Management) is completed his almost 8 years in our company ( still he is working with us )when he will leave the company he will be eligible to get his gratuity from company. At this moment his Basic is Rs. 2,00,250 and other allowance is Rs. 101752, that means the gratuity he will receive Rs. 13,93,855 (200250+101752*8*15/26)as per the act the maximum limit of gratuity is Rs. 10 lacs. Now my question how much amount of gratuity he will get if he leave the company – Rs. 10 lacs or Rs.13,93,855 ? If only Rs. 10 lacs then what about the balance Rs. 3,93,855/-?
Waiting for your valuable reply.
Thanks & Regards
Vaishali
From India, Mumbai
No,its incorrect..........D.A means dearness allowances.
you cant add other components of salary for calculation gratuity.if your organization salary structure is Basic+HRA+CONV+OTHER ALLOW.....and there is no D.A
then you will calculate gratuity on only Basic Salary.......if employee completed 5 years of services then he is eligible for gratuity and the gratuity formula is:-
basic+d.a*15/26*no of years services
From India, Faridabad
you cant add other components of salary for calculation gratuity.if your organization salary structure is Basic+HRA+CONV+OTHER ALLOW.....and there is no D.A
then you will calculate gratuity on only Basic Salary.......if employee completed 5 years of services then he is eligible for gratuity and the gratuity formula is:-
basic+d.a*15/26*no of years services
From India, Faridabad
No,its Wrong.... You cant add any other allow. in basic for gratuity. because gratuity formula = BASIC+DA/26*15* COMP. WORKING YEARS and maximum limit of gratuity amt is 5,00,000.
From India, Jaipur
From India, Jaipur
Hello,
I agree with Amit, The eligibility of Gratuity as per the act indicates that Basic and DA. subject to completion of 5 years service. If it is not shown any DA in the wage register, only basic salary to be taken for computation of Gratuity by exluding all allowances. The formula is already mentioned by Mr.Rishirajmishra which is in force.
Adoni Suguresh
Rtd.Sr.Executive (P&A)
From India, Bidar
I agree with Amit, The eligibility of Gratuity as per the act indicates that Basic and DA. subject to completion of 5 years service. If it is not shown any DA in the wage register, only basic salary to be taken for computation of Gratuity by exluding all allowances. The formula is already mentioned by Mr.Rishirajmishra which is in force.
Adoni Suguresh
Rtd.Sr.Executive (P&A)
From India, Bidar
Dear Vaishali,
Please remember that if the employer is required to comply with the statutory provisions of the Payment of Gratuity Act,1972 then he has to go as per the provisions of the Act. The definition of the "wages" is well known to you.You will agree that if there is no DA component in your salary structure then you have to calculate you gratuity amount taking into account your "Basic" salary only. What has been mentioned in all the Acts in general and PG Act in particular is MINIMUM. If your employer is ready to calculate the gratuity amount taking into consideration Basic + other allowance, there is no BAR and the same is perfectly in order.
As regards you second query, on the same analogy as mentioned above,though Section 4(3) of the Act limits the gratuity amount to TEN lakhs,but there is no bar for an employer to give OVER & ABOVE the statutory limit provided in the Act.
.
BS Kalsi
Member since Aug 2011
From India, Mumbai
Please remember that if the employer is required to comply with the statutory provisions of the Payment of Gratuity Act,1972 then he has to go as per the provisions of the Act. The definition of the "wages" is well known to you.You will agree that if there is no DA component in your salary structure then you have to calculate you gratuity amount taking into account your "Basic" salary only. What has been mentioned in all the Acts in general and PG Act in particular is MINIMUM. If your employer is ready to calculate the gratuity amount taking into consideration Basic + other allowance, there is no BAR and the same is perfectly in order.
As regards you second query, on the same analogy as mentioned above,though Section 4(3) of the Act limits the gratuity amount to TEN lakhs,but there is no bar for an employer to give OVER & ABOVE the statutory limit provided in the Act.
.
BS Kalsi
Member since Aug 2011
From India, Mumbai
Dear Sir,
I just want to know , i have an employee who were working with us since 8 years , but he was on probation.
Is he eligible for gratuity and what is maximum amount we can provide him as gratuity if his amount gets over Rs.10 Lac.
Regards'
Suman Shrivastav
From India, Delhi
I just want to know , i have an employee who were working with us since 8 years , but he was on probation.
Is he eligible for gratuity and what is maximum amount we can provide him as gratuity if his amount gets over Rs.10 Lac.
Regards'
Suman Shrivastav
From India, Delhi
Dear Suman Shrivastav,
When you ask a query, please remember to give all the details concerning the type of establishment, no. of persons employed, components of the salary of the employees etc. etc. because such information will facilicate to give a correct reply/answer.In absence of the detailed information, I am bound to give a general reply,which is as under:-
(a) If your establishment is covered under Section 3 of the Payment of Gratuity Act,1972 then you are under statutory obligation to pay gratuity to all the persons who leave (by way of reaching the age of retirement or resignation) after completing a continuous service of FIVE years except in the cases of death or disablement,where period of five years is not necessary.
Now coming to your query regarding the employee who has been working with you since 8 years but he was on probation,let me make it clear that under the definition of 'employee' in Section 2(e) only the apprentices appointed under the Apprentices Act,1961 are exempted.You are not allowed to keep a person on probation lifelong or as you wish.There are certain norms or guidelines to keep a person on probation otherwise the same will come in the category of "Victimisation" or "exploitation".
A ''probationer' is defined under "Model Standing Orders" as one who is provisionally employed to fill a vacancy in a permanent post and has not completed three months service in that post unless the probationary period is extended. If a permanent workman is employed as a probationer in a new post, he may, at any time, during the probationary period not exceeding three months, be reverted to his old permanent post unless the probationary period is extended.The maximum period, however, shall no case extend beyond one year. Though there has been pratice to appoint persons of probation for a period of TWO years but probation for contnuous period of EIGHT is beyond Imagination.
It is not clear from the details of his salary as to whether it is yearly or monthly, hence it is not possible to calculate the amount of gratuity.
BS Kalsi
Member since Aug 2011
From India, Mumbai
When you ask a query, please remember to give all the details concerning the type of establishment, no. of persons employed, components of the salary of the employees etc. etc. because such information will facilicate to give a correct reply/answer.In absence of the detailed information, I am bound to give a general reply,which is as under:-
(a) If your establishment is covered under Section 3 of the Payment of Gratuity Act,1972 then you are under statutory obligation to pay gratuity to all the persons who leave (by way of reaching the age of retirement or resignation) after completing a continuous service of FIVE years except in the cases of death or disablement,where period of five years is not necessary.
Now coming to your query regarding the employee who has been working with you since 8 years but he was on probation,let me make it clear that under the definition of 'employee' in Section 2(e) only the apprentices appointed under the Apprentices Act,1961 are exempted.You are not allowed to keep a person on probation lifelong or as you wish.There are certain norms or guidelines to keep a person on probation otherwise the same will come in the category of "Victimisation" or "exploitation".
A ''probationer' is defined under "Model Standing Orders" as one who is provisionally employed to fill a vacancy in a permanent post and has not completed three months service in that post unless the probationary period is extended. If a permanent workman is employed as a probationer in a new post, he may, at any time, during the probationary period not exceeding three months, be reverted to his old permanent post unless the probationary period is extended.The maximum period, however, shall no case extend beyond one year. Though there has been pratice to appoint persons of probation for a period of TWO years but probation for contnuous period of EIGHT is beyond Imagination.
It is not clear from the details of his salary as to whether it is yearly or monthly, hence it is not possible to calculate the amount of gratuity.
BS Kalsi
Member since Aug 2011
From India, Mumbai
Dear all,
Let us all remember that Payment of Gratuity Act is normative legislation; it sets norms below which you can't pay.
As such including any component (besides basic pay & DA) for calculation of gratuity is prerogative of the org. Same is true for quantum. Only thing is any payment in excess of what is laid in the Act may not be accepted as business expense by income tax authority; such 'excess' payments are not illegal.
Shrikant Prabhudesai
From India, Mumbai
Let us all remember that Payment of Gratuity Act is normative legislation; it sets norms below which you can't pay.
As such including any component (besides basic pay & DA) for calculation of gratuity is prerogative of the org. Same is true for quantum. Only thing is any payment in excess of what is laid in the Act may not be accepted as business expense by income tax authority; such 'excess' payments are not illegal.
Shrikant Prabhudesai
From India, Mumbai
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