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sandeep (PM)     18 March 2011

Gratuity Calculation - Final settlement

I have recieved grautiy from my previous employer with final settlement.  I am not statisfied with final settlement

Employee Gratuity is calculated by the following formula & stated on present fixed salary structure :

(Basic ) x 15 / 26 x No. of year in service*

 I am not sure  why D.A is not icluded as per the gratulity law i.e

(Basic + D.A) x 15 / 26 x No. of year in service*.

Please respond

 

 

 



Learning

 34 Replies

Isaac Gabriel (Advocate)     18 March 2011

Dearness allowance last drawn will also constitute " pay " as per section 2(s) of the payment of Gratuity Act 1972. for the purpose of calculating Gratuity.

Pranab Banerjee (Govt Service)     18 March 2011

Sir, I hope the Gratuity Calculation will be on the Basis of Basic Pay + D.A. as per Gratuity Act. Attach a file for your reference.

Thanks

Pranab Banerjee.West Bengal


Attached File : 2 2 gratuity calculator for central govt private concern only.xls downloaded: 4219 times

T.KRISHNARAO (MANAGING PARTNER)     18 March 2011

mr Sanadeep 

 

I have also recd the gratuity on the basic pay itself .

As your PF deductions also on the basic salary only DA is not included .

If PF deductions are INCLUSIVE OF DA THEN ONLY GRATUAITY WILL ALSO BE ON THE BASIS OF INCLUSIVE OF DA .

As DA is not included while making contribution of PF then DA is also eclusive of gratuaity calculation .

regards.

T.KRISHNA RAO 

 

 

 

anishamital (n/a)     20 March 2011

Sir,

I  am sharing with u which i knows about gratuity  calculation is that  gratuity is calculated on the actual wages last drawn by the employee(Basic+DA).

Gratuity is calculated as:

Basic+DA(monthly wages last drawn)x15/26x No. of completed years of services(part of a year in excess of 6 months is counted as 1 year)

NOTE: Wages means all emoluments earned by an employee while on duty or on leave in accordance with the condition of employment and include DA.

Thanks & Regards

Anisha 

Kirti Kar Tripathi (lawyer)     20 March 2011

the definition of Wages will be brrowed from from the Payment of Wages Act for the purpose of calculating gratuity i.e. 

 

vi) "wages" means all remuneration (whether by way of salary allowances or otherwise) expressed in terms of money or capable of being so expressed which would if the terms of employment express or implied were fulfilled by payable to a person employed in respect of his employment or of work done in such employment and includes - 

(a) any remuneration payable under any award or settlement between the parties or order of a court; 

(b) any remuneration to which the person employed is entitled in respect of overtime work or holidays or any leave period; 

(c) any additional remuneration payable under the terms of employment (whether called a bonus or by any other name); 

(d) any sum which by reason of the termination of employment of the person employed is payable under any law contract or instrument which provides for the payment of such sum whether with or without deductions but does not provide for the time within which the payment is to be made; 

(e) any sum to which the person employed is entitled under any scheme framed under any law for the time being in force, but does not include - 

(1) any bonus (whether under a scheme of profit sharing or otherwise) which does not form part of the remuneration payable under the terms of employment or which is not payable under any award or settlement between the parties or order of a court; 

(2) the value of any house-accommodation or of the supply of light water medical attendance or other amenity or of any service excluded from the computation of wages by a general or special order of the State Government; 

(3) any contribution paid by the employer to any pension or provident fund and the interest which may have accrued thereon; 

(4) any travelling allowance or the value of any travelling concession; 

(5) any sum paid to the employed person to defray special expenses entailed on him by the nature of his employment; or 

(6) any gratuity payable on the termination of employment in cases other than those specified in sub-clause (d). 

1 Like

Akshata (project analyst)     26 March 2012

@Kirti Kar Tripathi  

can you help me formulate the statement you have made?  FYI: i was told i am at risk(my role was made redundant and my notice period had started, if i  get hired internally to another team with in the notice period than my association with the company would continue as usual else I will be terminated by end of the notice period).

I tried my best to land an internal job for more than a month and put down my paper when the HR misguided me that I was not eligible for gratuity even if served the complete notice period. With the help of lawyersclubindia members i have come to realize that I am eligible for gratuity but facing obstacles to calculate my gratuity.

In my case would i be considered as terminated? does the formula differe for resignation and termination?

found thisby googleling

  1. Gratuity = Monthly Salary (Basic +DA) x 15 days x No. of yrs. of service/26
  2. *Completed years of service: More than 6 months service will be counted as full year of service i.e. 1 year 7 month will counted 2 years
  3. Max. Gratuity payable under the Act is Rs. 3,50,000*/- * Please confirm it, This is exempted from tax if drawn after the retirement or leaving the job.

is it correct? also there is no DA in my salarty slip, is there a way to calculate it?  from the parameters in my payslip? or i consider it zero?

sample pay slip

 

Earnings Amount Deductions Amount

Basic

House Rent Allowance:

Taxable Allowance

Supplementary Allowance

A

B

C

D

Provident Fund

Voluntary Provident Fund

Income Tax

Transport Deduction

Professional Tax

F

G

H

I

J

Gross Earnings(A+B+C+D) E Gross Deductions(F+G+H+I+J) K

 

 

 

 

 

 

 

 

EARNINGS ANNUAL

Lta

Medical

L

M

Kirti Kar Tripathi (lawyer)     27 March 2012

Definition of Wages in Payment of Gratuity Act runs as follows

527.(s) "wages" means all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employment and which are paid or are payable to him in cash and includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance.

Keeping in view of aforesaid definition execpt House Rent amount amount paid in all other heads will come within the ambit of wages for the purpose of calculation of gratuity.

Akshata (project analyst)     27 March 2012

So Gratuity in my case would be = Monthly Salary (Basic +Taxable Allowance+Supplementary Allowance) x 15 days x No. of yrs. of service/26

am I correct? will the formula be different becoz i was terminated?

Kumar Doab (FIN)     28 March 2012

Gratuity is payable in case of termination of employment in case of resignation/termination/Superannuation/death/disablement due to accident or disease/retrenchment/voluntary retirement. (Section: 4, Payment of gratuity.)

You may submit a gentle representation to HR that as per your understanding you should be paid gratuity and let them reply to you.

You can also lodge your claim in FormI with Controlling Authority which can be ALC/DLC in your case.

Kirti Kar Tripathi (lawyer)     28 March 2012

@ Akshata

yes, you are right

Prashant Singh (Human Resource)     10 June 2012

Dear Tripathi Sir,

  I am new to this site which is quite informative and I would request you to kindly suggest me on the following questions:

This is in reference to the query raised by Akshata  about the components included in the wages for the purpose of calculation of gratuity. As given by you the definition of wages in Gratuity Act “527.(s) "wages" means all emoluments which are earned by an employee while on duty or on leave in accordance with the terms and conditions of his employment and which are paid or are payable to him in cash and includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance.”

 Along with the above I also consulted a couple of labour law books ( not bare act) for the definition of wages which also mentions the same “but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance.”. So in the above mentioned case of Akshata will Taxable and Supplementary Allowance will be included in the calculation of gratuity as they are also allowances and the definition says only Basic and DA should be included.  This is more with reference to the private sector salaries which is mainly constituted of Basic and other allowances and not DA.

 -          Will PF be included in the calculation of gratuity provided that employee is contributing both the employer and his / her contribution from his / her salary as a PF deduction.

 -          While reading the Act I come across the term “Controlling Authority” quite many times. Please suggest that this Controlling Authority is the Asst. PF commissioner or someone else.

 -      After receiving the Gratuity Application form from the employee and paying the gratuity to the respective employee did the employer has to send that application form to the controlling authority or some communication needs to be made to him about the payment.

-      Now the gratuity limit has been raised to Rs. 10,00,000 so as per earlier notifications it remains fully exempted or it will be taxable after a certain amount specially for the private sector employees.

-      If a female employee takes more then 12 weeks of maternity leaves then while calculating his gratuity additional leaves above 12 weeks will be considered or not as to the best of my knowledge Maternity benefit act gives a privilege of additional 1 month leave to a female provided that she presents a certificate from a doctor that she needs one more month leave as result of some complication due to maternity process.

I will be highly grateful if some information can be given on the above.

Thanks in advance.

Prashant

V.Harikrishnan (Labour Law Consultant)     12 June 2012

If you are covered by the provisions of the Payment of Gratuity Act,then the dearness allowance has to be taken into account for calculating the gratuity. 

V.HARIKRISHNAN

Joint Commissioner of Labour (Retired)

Government of Tamilnadu

Prashant Singh (Human Resource)     12 June 2012

DEAR HARIKRISHNAN SIR,

 Please suggest that if the employee is in a private organisation where the concept of Dearness Allaowance is not much included in the salaries then what all components of salary will be included for the calculation of Gratuity.

Thanks

Prashant

Kumar Doab (FIN)     12 June 2012

Gratuity: (Basic+DA/26)*15 days of wages *Number of years in service.

It is felt That:

D.A. is calculated as a percent of the basic salary. This amount is then added to the basic salary. Refer Minimum Wages Act of your state and look into % of DA for each category of employees.

Once you have computed DA in basic salary,  while calculating gratuity company may take Basic Salary.

DA is percentage of basic salary and taken as percentage increase over base CPI (Consumer Price Index) to Current average CPI. Base CPI (say 50) is decided as reference. Current average CPI (say 75) is taken for current quarter. Thus DA shall be 50%.

Valuable advice of learned experts/members is sought.


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