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Joe (-)     18 March 2011

Gratuity Calculation for 5 day week companies

Hello Everybody,

I was in the process of calculating gratuity.   the following is the wording that I could find.

The Payment of Gratuity Act, 1972 applies to factories and other establishments employing ten or more persons. On completion of five years service, the employees are entitled to payment of gratuity @15 days wages for every completed year of service or part thereof in excess of six months subject to a maximum of Rs.3.50 lakh. The current maximum limit is applicable from 24.9.1997. The wage ceiling for coverage under the Act has since been removed w.e.f. 24.05.1994.

It says 15 days of basic.

 

I worked in a company where we had 5 day work week.  For all internal calculations 22 days was considered as average working days per month.  (5days * 52 weeks / 12months = 22days/month)

Hence when I calculated Gratuity I calculated as below.

Monthly Basic * 15 / 22 * 5Years.

But the employer is calculating it as follows

Monthly Basic * 15 / 26 * 5Years.

I feel I am right because the rule says 15 days of Basic...   Any inputs on this?

 

 

Thanks

Joe



Learning

 3 Replies

Lokendra Singh (Advocate)     18 March 2011

Hi Joy,

It will be Basic*15/26*5 years. It will not changed.  It is not related to 5 days or 6 days in week. it is company's exta benefit to employee to give 2 days rest in week.

Regards

V. VASUDEVAN (LEGAL COUNSEL)     18 March 2011

I concur with Advocate Singh's view points.

Govind Sharma (Manager- HR & Admin)     22 March 2011

Hi,

 

Irrespective of the company or its type, Gratuity is paid on the bais of 15 days basic + Da (Last working month's basic) salary for no. of years of services completed

 

It is based on following calulation

 

Basic salary/ 26 X 15 X no. of years of Service Completed

 

Suppose I have basic salary 12000 per month
 and I have worked for 13 Years

 

then

 

(12000/ 26 X 15) X 13

= 6923 X 13

= 89999

 

Govind

 

 

Originally posted by :Joe

"
Hello Everybody,

I was in the process of calculating gratuity.   the following is the wording that I could find.

The Payment of Gratuity Act, 1972 applies to factories and other establishments employing ten or more persons. On completion of five years service, the employees are entitled to payment of gratuity @15 days wages for every completed year of service or part thereof in excess of six months subject to a maximum of Rs.3.50 lakh. The current maximum limit is applicable from 24.9.1997. The wage ceiling for coverage under the Act has since been removed w.e.f. 24.05.1994.

It says 15 days of basic.

 

I worked in a company where we had 5 day work week.  For all internal calculations 22 days was considered as average working days per month.  (5days * 52 weeks / 12months = 22days/month)

Hence when I calculated Gratuity I calculated as below.

Monthly Basic * 15 / 22 * 5Years.

But the employer is calculating it as follows

Monthly Basic * 15 / 26 * 5Years.

I feel I am right because the rule says 15 days of Basic...   Any inputs on this?

 

 

Thanks

Joe
"

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