Hello HR Professionals,
I would like to implement Gratuity Benefits for our employees as per The Payment of Gratuity Act 1972. As per the Act, the Gratuity formula is = Number of Years of Service * Last Drawn Basic + DA * 15/26. I have some doubts regarding the same. How will we consider Basic for calculation in the case of an employee whose basic salary is, for example, 45,000 (Basic + DA), but his Basic is restricted to PF as 15,000? Which Basic needs to be considered while calculating his Gratuity? Please explain.
From India, Mumbai
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1I would like to implement Gratuity Benefits for our employees as per The Payment of Gratuity Act 1972. As per the Act, the Gratuity formula is = Number of Years of Service * Last Drawn Basic + DA * 15/26. I have some doubts regarding the same. How will we consider Basic for calculation in the case of an employee whose basic salary is, for example, 45,000 (Basic + DA), but his Basic is restricted to PF as 15,000? Which Basic needs to be considered while calculating his Gratuity? Please explain.
From India, Mumbai
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Dear Sonal,
EPF (MP) Act, 1952, and the PG Act, 1972 are separate legislations exclusively for different types of statutory terminal benefits for industrial employees. EPF is a fund created out of periodic mutual contributions made by the employer and employee, whereas gratuity is a one-time lump sum terminal benefit payable solely by the employer, towards which the employee has nothing to contribute. As per the PG Act, 1972, there is a ceiling only on the maximum amount of gratuity payable, not on the factors for calculation. Therefore, you have to adopt the method of calculating gratuity as set down by the respective Act only.
From India, Salem
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EPF (MP) Act, 1952, and the PG Act, 1972 are separate legislations exclusively for different types of statutory terminal benefits for industrial employees. EPF is a fund created out of periodic mutual contributions made by the employer and employee, whereas gratuity is a one-time lump sum terminal benefit payable solely by the employer, towards which the employee has nothing to contribute. As per the PG Act, 1972, there is a ceiling only on the maximum amount of gratuity payable, not on the factors for calculation. Therefore, you have to adopt the method of calculating gratuity as set down by the respective Act only.
From India, Salem
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Dear Sonal, As suggested by our Ld. member Mr. Umakanthan M we are to consider basic salary as Rs. 45,000(Basic +DA) for calculation of amount of gratuity. R N KHOLA
From India, Delhi
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From India, Delhi
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