jyotikotwal
Hello HR folks,

I have an inquiry regarding the calculation of gratuity for employees who have completed five years of service and are now exiting the company.

As our company introduced the gratuity policy in October 2020, I would like clarification on whether the gratuity calculation for these employees should commence from the inception of their employment or from the implementation date of the gratuity policy in October 2020.

Your guidance on this matter is greatly appreciated, as it will assist in ensuring accurate and fair financial settlements for the departing employees.

Thank you for your attention to this matter.

From India, Bardoli
vmlakshminarayanan
937

Hi,

In this case Gratuity should be calculated from their date of joining and not from Oct,2020.

Employees who are working for more than 5 years at the time of their resignation Gratuity should be paid considering their Date of joining with the Company.

From India, Madras
mailrsr
11

As per SEc.4 of the Payment of Gratuity Act, 1972, gratuity is payable to an employee on termination of his employment after he has rendered continuous service for not less than 5 years
a) on his superannuation; or
b) on his retirement or resignation; or
c) on his death or disablement due to accident or disease (in case of death, requirement of 5 years of continuous service is not mandatory).

As per Sec.4A, every employer has to obtain an insurance in the manner prescribed, for his liability for payment towards the gratuity under the Act from LIC or any other prescribed insurer.

So, if an employee who leaves the company has completed 5 years of continuous service is obviously eligible for payment of gratuity. It has to be calculated from the date of his joining till the date of separation and not from the date on which the company took the policy. Non taking of a policy itself is a violation by the employer under the Act.
Regards,

From India, Madras
Madhu.T.K
4226

Section 4A pertaining to compulsory insurance applied to such organisations in the state which has notified it as mandatory and does not apply to all the states. The section reads as "With effect from such date as may be notified by the appropriate Government...." and that means the state government should notify that this section of compulsory insurance of gratuity fund is enforced with effect from certain date. Otherwise, only a provision is required to be made in the financial statements of the company. I understand that very few states, Andhra Pradesh, have notified it.
From India, Kannur
k-v-d-prasad
Hi The formula for Calculating Gratuity is Basic /26 x 15 x No.of years of Service. Six months and above should be taken as one year. For ex 5 years 6 months should be taken as 6 years.
From India, Hyderabad
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