Gratuity

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Shinu (Querist)
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02 February 2016 Please tell about gratuity rule in India.Bcz I was worked in a company last 4.10 years.I am eligible or not for getting gratuity? Shinu

KAVIRAJA ADDANGADI

KAVIRAJA ADDANGADI (Expert)
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02 February 2016 You have to complete minimum 5 years of service in the company,

Gratuity is a lump sum that a company pays when an employee leaves an organization, and is one of the many retirement benefits offered by a company to an employee.

In India, the basic requirements for gratuity are set out under the Payment of Gratuity Act, 1971. An employer may also choose to pay gratuity outside of that which is required by this Act.

Applicability

The Payment of Gratuity Act, 1971, applies to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments with ten or more employees. Gratuity is fully paid by the employer and no part comes from an employee�s salary.

To fall under the Act, an employee needs to have at least five full years of service with the current employer to qualify for gratuity, except in the event that an employee passes away or is rendered disabled due to accident or illness, in which case gratuity must be paid.

Gratuity is paid when an employee:

Is eligible for superannuation;
Retires;
Resigns; or
Passes away or is rendered disabled due to accident or illness (if an employee passes away, gratuity will be paid to the employee�s nominee).
Calculation

Gratuity = Last Drawn Salary � 15/26 � No. of Years of Service

Notes:

The ratio 15/26 represents 15 days out of 26 working days in a month
Last drawn salary = Basic Salary + Dearness Allowance
Years of Service are rounded down to the nearest full year. For example, if the employee has a total service of 20 years, 10 months and 25 days, only 20 years will be factored into the calculation.

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