Gratuity means
a lump sum payment given by employer to employees at the time of retirement. If
the employee dies then gratuity is paid to the family members of the employee.
It is gift given by employer to his employees on retirement or death. If The
Payment of Gratuity Act applies to an employer then it is compulsory for the
employer to pay gratuity. The payment of gratuity is not necessary for those
employers upon whom this law is not applicable.
Applicability of this law:
ü
The Payment of Gratuity Act is applicable for
those employers who have ten or more employees.
ü
Once the law becomes applicable then it will
continue to apply even if the number of employees has reduced below ten.
ü
The Payment of Gratuity Act is applicable in
whole of India except Jammu and Kashmir.
Eligible Employees:
ü If
an employer is covered under The Payment of Gratuity Act then he will have to
pay gratuity to eligible employees.
ü Gratuity
is paid to those employees who work for continuously five years or more.
ü If
the employee has died then the condition of five years is not applicable.
Computation of Gratuity: Section 4
ü
Gratuity is calculated as per the provisions of
sec 4.
ü
First of all service of employee is calculated
and rounded off.
ü
If the service has a time period of more than
six months in any year it is considered as one year however if the service has
a time period of six months or lesser than these months are ignored.
ü
The salary for last month before retirement is
calculated which comprises of basic pay and dearness allowance only.
ü
From the last month’s salary fifteen days salary
is calculated by taking number of days in a month as 26. Example if one month’s
salary = 10000 then fifteen day’s salary = (10000/26)*15
ü
The fifteen days salary is multiplied by the
length of service (years of service) and gratuity is calculated.
ü
Under section 4 every employer has to pay
gratuity calculated by this provision, however maximum gratuity payable is
350000. Hence the employer is not liable to pay gratuity more than Rs 350000
ü
If the employer wants to pay gratuity more than
the limit of 350000 than he may pay , however the employee cannot demand this
payment as a right from the employer
Example:
Mr Jan retired from service after 30 years and 8
months, his basic pay is 7000/month and D.A is 3000/month. Calculate his
Gratuity.
Solution: Fifteen days salary =
(7000+3000)/26)*15 = 5769
Length of service =
31 years
Gratuity payable =
31*5769 = 178839
No comments:
Post a Comment
Tell Us What You've Got...