Karnataka Gratuity Rules

In Karnataka, the controlling authority responsible for gratuity registration is the Labour Commissioner Karmiga office. If you operate a business establishment within Karnataka’s jurisdiction and fall under the purview of The Payment of Gratuity Act, 1971, you must register your establishment with the Labour Commissioner in the prescribed format. 

Thanks Do we need to take the policy for all employees or only employees who have finished 5 years of service.

Register first for the scheme.

The formula will be 

Last basic pay x 15/26 x years in service

If you don't opt for this scheme

Average basic pay x 1/6 x no of years in service

Gratuity is a liability 

Ok, I was on my break

Under the Payment of Gratuity Act, the following rules apply:

1. Reserve Maintenance:

   • Employers are required to create a gratuity reserve fund to meet their gratuity obligations.
   • The reserve fund must be maintained at a level sufficient to cover the gratuity payments for eligible employees.
   • The amount of the reserve fund depends on the total liability for gratuity payments based on the number of employees and their completed years of service.

2. Liability Creation:

   • An employer must create a liability for gratuity as soon as an employee becomes eligible.
   • An employee is eligible for gratuity after completing five continuous years of service with the same employer.
   • The liability is calculated based on the employee’s last drawn salary and the completed years of service.
   • The employer must set aside funds in the reserve to cover this liability.

3. Duration of Service:

   • An employee is considered to have completed a year of service if they have worked for:
     • 240 days in any establishment that operates for more than six days a week.
     • 190 days if employed below ground in a mine or in an establishment that works for less than six days a week.

Eligible employees dont require long term obligations. An its the company responsibility to manage reserves for its employees