According to the current formula for formal sector workers, the gratuity amount depends on the tenure of service and last drawn salary. It is typically calculated according to this formula: Last drawn salary (basic salary plus dearness allowance) multiplied by the number of completed years of service multiplied by 15/26.
According to this formula, a time period of over six months or more is considered as one year. This means if you have completed five years and seven months of service, the number of years would be considered as six years for the calculation of gratuity benefit. On the other hand, if the service period is five years and five months, for gratuity calculation, it will be considered as five years.
Gratuity is a benefit received by an employee for services rendered to an organization. In a move that will benefit workers of private and public sector companies, the Cabinet on Tuesday approved the introduction of Payment of Gratuity (Amendment) Bill, 2017, which seeks to double the gratuity limit for formal sector employees to Rs. 20 lakh from the current limit of Rs. 10 lakh. The new limit will come into force once the Payment of Gratuity Act is amended.
Experts have welcomed the move. Anshul Prakash, a partner at the law firm Khaitan & Co, said, "The central government's move to amend and increase the gratuity ceiling resulting in the statutory cap being doubled is a welcome step from an employee's perspective. Earlier, employers could limit their liability to the statutory cap of Rs. 10 lakh even if the calculation of gratuity for an eligible employee resulted in a higher figure."
An employer can, however, give higher gratuity than the amount under the prescribed formula. Gratuity is a benefit received by an employee for services rendered to an organization. For companies covered under the Gratuity Act, this benefit is paid when an employee completes five or more years of service with the employer. The Gratuity Act applies to establishments employing 10 or more persons. The Gratuity Amendment Bill seeks to make formal sector workers eligible for a tax-free gratuity of up to Rs. 20 lakh.
The main purpose of enacting this Act is to provide social security to workers after retirement, whether retirement is a result of the rules of superannuation, physical disablement, or impairment of any vital part of the body. Considering the inflation and wage increase even in the case of employees engaged in the private sector, the government is of the view that the entitlement of gratuity should be revised for employees who are covered under the Payment of Gratuity Act, 1972," the government statement said.
The move to amend gratuity rules for formal sector workers comes after the limit for central government employees was hiked to Rs. 20 lakh, according to recommendations of the 7th pay commission. The relevant amendment for central government employees was notified on July 25, 2016, and the enhanced ceiling amount made effective from January 1, 2016.
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18According to this formula, a time period of over six months or more is considered as one year. This means if you have completed five years and seven months of service, the number of years would be considered as six years for the calculation of gratuity benefit. On the other hand, if the service period is five years and five months, for gratuity calculation, it will be considered as five years.
Gratuity is a benefit received by an employee for services rendered to an organization. In a move that will benefit workers of private and public sector companies, the Cabinet on Tuesday approved the introduction of Payment of Gratuity (Amendment) Bill, 2017, which seeks to double the gratuity limit for formal sector employees to Rs. 20 lakh from the current limit of Rs. 10 lakh. The new limit will come into force once the Payment of Gratuity Act is amended.
Experts have welcomed the move. Anshul Prakash, a partner at the law firm Khaitan & Co, said, "The central government's move to amend and increase the gratuity ceiling resulting in the statutory cap being doubled is a welcome step from an employee's perspective. Earlier, employers could limit their liability to the statutory cap of Rs. 10 lakh even if the calculation of gratuity for an eligible employee resulted in a higher figure."
An employer can, however, give higher gratuity than the amount under the prescribed formula. Gratuity is a benefit received by an employee for services rendered to an organization. For companies covered under the Gratuity Act, this benefit is paid when an employee completes five or more years of service with the employer. The Gratuity Act applies to establishments employing 10 or more persons. The Gratuity Amendment Bill seeks to make formal sector workers eligible for a tax-free gratuity of up to Rs. 20 lakh.
The main purpose of enacting this Act is to provide social security to workers after retirement, whether retirement is a result of the rules of superannuation, physical disablement, or impairment of any vital part of the body. Considering the inflation and wage increase even in the case of employees engaged in the private sector, the government is of the view that the entitlement of gratuity should be revised for employees who are covered under the Payment of Gratuity Act, 1972," the government statement said.
The move to amend gratuity rules for formal sector workers comes after the limit for central government employees was hiked to Rs. 20 lakh, according to recommendations of the 7th pay commission. The relevant amendment for central government employees was notified on July 25, 2016, and the enhanced ceiling amount made effective from January 1, 2016.
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transport company under gratuity act. if company not proved joining letter to employee. that company employee able to claim gratuity. please
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