Gratuity Calculation

The gratuity computation is as follows:

Basic salary as on 31st Mar+DA * (15/26) * No. of yrs of service.

Example:

An employee joins on 1st March 2002 and resigns on 26th December 2008. His basic salary as on 31st Mar 2008 is 15000.00, then how do you calculate gratuity

Ans:1st March 2002 to 26th December 2008 = 6.8 years of service15000 * (15/26) * 6.8 years = 58846.00If there is a increase in basic salary during the year, the same can be considered proportionately.

This is how to calculate Gratuity....

Recovery of gratuity.

Recovery of gratuity.

If the amount of gratuity payable is not paid by the employer, within the prescribed time to the person entitled thereto, the controlling authority shall, on an application made to it in this behalf by the aggrieved person, issue a certificate for that amount to the Collector, who shall recover the same, together with compound interest thereon at the rate of nine per cent per annum, from the date of expiry of the prescribed time, as arrears of land revenue and pay the same to the person entitled thereto. Section 8.

Protection of gratuity

Protection of gratuity

No gratuity payable under the Payment of Gratuity Act and the rules made thereunder shall be liable to attachment in execution of any decree or order of any civil, revenue or criminal court. Section 13.

Appeal of Gratuity

Appeal.

Any person aggrieved by an order of the controlling authority may, within sixty days from the date of the receipt of the order, prefer an appeal to the Regional Labour Commissioner (Central) of the area, who has been appointed as the appellate authority by the Central Government:

Provided that the appellate authority may, if it is satisfied that the appellant was prevented by sufficient cause from preferring the appeal within the said period of sixty days, extend the said period by a further period of sixty days. Section 7(7).

Forfeiture of Gratuity

Forfeiture of gratuity

(1) The gratuity of an employee, whose services have been terminated for any act, wilful omission or negligence causing any damage or loss to, or destruction of, property belonging to the employer, shall be forfeited to the extent of the damage or loss so caused.

(2) The gratuity payable to an employee shall wholly be forfeited--
(a) if the services of such employee have been terminated for his riotous or disorder conduct or of any other act of violence on his part, or
(b) if the services of such employee have been terminated for any act which constitutes an offence involving moral turpitude, provided that such offence is committed by him in the course of his employment. Section 4(6).

Notice of opening, change or closure of the establishment

Notice of opening, change or closure of the establishment.

(1) A notice shall be submitted by the employer to the controlling authority of the area within thirty days of any change in the name, address, employer or nature of business. Rule 3(2).

(2) Where an employer intends to close down the business he shall submit a notice to the controlling authority of the area at least sixty days before the intended closure. Rule 3(3).

Payment of Gratuity

Payment of gratuity.

(1) Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years--
(a) on his superannuation, or
(b) on his retirement or resignation, or
(c) on his death or disablement due to accident or disease:
Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement.
Disablement means such disablement which incapacitates an employee for the work which he was capable of performing before the accident or disease resulting in such disablement. Section 4(1).
(2) For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days' wages based on the rate of wages last drawn by the employee concerned:
Provided that in the case of a piece-rated employee, daily wages shall be computed on the average of the total wages received by him for a period of three months immediately preceding the termination of his employment, and, for this purpose, the wages paid for any overtime work shall not be taken into account:
Provided further that in the case of an employee employed in a seasonal establishment, the employer shall pay the gratuity at the rate of seven days' wages for each season. Section 4(2).
(3) The amount of gratuity payable to an employee shall not exceed twenty months wages. Section 4(3).

Application for gratuity

Application for gratuity.

1) An employee who is eligible for payment of gratuity under the Act, or any person authorised, in writing, to act on his behalf, shall apply ordinarily within thirty days from the date gratuity becomes payable:

Provided that where the date of superannuation or retirement of an employee is known, the employee may apply to such employer before thirty days of the date of superannuation or retirement. Rule 7(1).

(2) A nominee of an employee who is eligible for payment of gratuity shall apply, ordinarily within thirty days from the date the gratuity became payable to him, to the employer. Rule 7(2).
(3) A legal heir of an employee who is eligible for payment of gratuity shall apply, ordinarily within one year from the date the gratuity became payable to him, to the employer. Rule 7(3).
(4) An application for payment of gratuity filed after the expiry of the periods specified above shall also be entertained by the employer if the applicant adduces a sufficient cause for the delay. Rule 7(5).

Nomination of Gratuity Act

Nomination.

(1) Each employee, who has completed one year of service, after the commencement of the Payment of Gratuity (Central) Rules, 1972 shall make within thirty days of completion of one year of service, a nomination. Section 6(1) read with Rule 86(I1)
(2) If an employee has a family at the time of making a nomination, the nomination shall be made in favour of one or more members of his family and any nomination made by such employee in favour of a person who is not a member of his family shall be void. Section 6(3).
(3) If at the time of making a nomination, the employee has no family, the nomination can be made in favour of any person or persons, but if the employee subsequently acquires a family, such nomination shall forthwith become invalid and the employee shall make within 90 days fresh nomination in favour of one or more members of his family. Section 6(4) read with Rule 6(3).
(4) A nomination or a fresh nomination or a notice of modification of nomination shall be signed by the employee or, if illiterate, shall bear his thumb-impression in the presence of two witnesses, who shall also sign a declaration to that effect in the nomination, fresh nomination or notice of modification of nomination as the case may be. Rule 6(5).
(5) A nomination may, subject to the provisions of sub-sections (3) and (4) of Section 6, be modified by an employee any time after giving to his employer a written notice of his intention to do so. Section 6(5).
(6) A nomination or fresh nomination or notice of modification of nomination shall take effect from the date of receipt of the same by the employer. Rule 6(6).

Explanation of Gratuity Act

Explanation I

In the cease of an employee who is not in uninterrupted service for one year, he shall be deemed to be in continuous service if he has been actually employed by an employer during the twelve months immediately preceding the year for not less than--
(i) 190 days, if employed below the ground in a mine, or
(ii) 240 days, in any other case, except when he is employed in a seasonal establishment.

Explanation II

An employee of a establishment shall be deemed to be in continuos service if he has actually worked for not less than seventy-five per cent of the number of days on which the establishment was in operation during the year. Section 2(d)·
(d) “Controlling authority” means an authority appointed by an appropriate Government under Section 3. Section 2(d).
(e) "Family", in relation to an employee, shall be deemed to consist of---
(i) in the case of a male employee, himself, his wife, his children, whether married or unmarried, his dependent parents and the widow and children, of his predeceased son, if any,
(ii) in the case of a female employee, herself, her husband, her children, whether married or unmarried, her dependent parents and the dependent parents of her husband and the widow and children of her predeceased son, if any:
the employee. Section 2(h).

Definitions of Gratuity Act

Definitions

(a) "Appropriate Government" means (i) in relation to an establishment--
(a) belonging to, or under the control of, the Central Government,
(b) having branches in more than one State,
(c) of a factory belonging to, or under the control of, the Central Government,
(d) of a major port, mine, oilfield or railway company, the Central Government,
(ii) in any other case, the State Government. Section 2(a).
(b) "Completed year of service" means continuos service for one year. Section 2(b).
(c) "Continuos Service" means uninterrupted service and includes service which is interrupted by sickness, accident, leave, lay-off, strike or a lock-out or cessation of work not due to any fault of the employees concerned, whether such uninterrupted or interrupted service was rendered before or after the commencement of this Act.

To whom the Act Applies-Gratuity Act

To whom the Act Applies.

The Act applies to (a) every factory, mine, oilfield, plantation, port and railway company; (b) every shop or establishment within the meaning of any law for the time being in force in relation to shops and establishments in a State, in which ten or mote persons are employed, or were employed, on any day of the preceding twelve months; and (c) such other establishments a class of establishments, in which, ten or more employees are employed, or were employed, on any day of the preceding twelve months, as the Central Government may, by notification, specify in this behalf. Section 1(3).