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Description
Payment of Gratuity Act, 1972 is an Indian law that makes certain industries pay a one-time gratuity to retired employees. The law applies to railways, ports, factories, oilfields, plantations, mines and shops. The gratuity is 15 days’ wages for every year of employee service, or partial year over six months.
What is the rule for payment of gratuity?
The retirement gratuity will be equal to 1/4th of the employee’s emoluments for each completed 6 monthly period of qualifying service, subject to a maximum of 16½ times the emoluments. The amount of retirement gratuity or death gratuity payable under the rule will not exceed Rs. 20 lakh.
Payment of gratuity: Eligibility and calculation
Under Section 4, payment of gratuity is mandatory. Gratuity shall be payable to an employee on termination of employment after he has rendered continuous service for not less than five years in a single organisation.
How is payment of Gratuity Act 1972 calculated?
The formula is: (15 * Your last drawn salary * the working tenure) / 30. For example, you have a basic salary of Rs 30,000. You have rendered continuous service of 7 years and the employer is not covered under the Gratuity Act. Gratuity Amount = (15 * 30,000 * 7) / 30 = Rs 1,05,000.
What is the interest on gratuity?
Interest at the rate of 8% per annum be paid by the employer if the payment is made within four weeks, failing with rate of interest would be payable at the rate of 10% per annum.
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