In the new law, the wage earners from rank and file to senior officers can get more gratuity payout after superannuation or resignation because clear formulas stand enacted under the Payment of Gratuity Act, 1972. At present, considering an employee (with a gross monthly salary of ₹35,000 per month) has an experience of five years’ continuous service, the gratuity amount works out to ₹1,41,346.
This was such an exemplar which happened amidst the loud cries for a retirement fund which is transparent and employee-friendly in India.
Who Is Entitled To gratuity?
The employees of:
- Private establishments, employing 10 or more persons
- Government or government-aided offices
- Educational institutions and other notified sectors
Are entitled to gratuity on completion of 5 years of continuous service in the organization, with some exceptions (such as death or disablement).
How Is Gratuity Calculated?
The formula for the calculation of the gratuity shall be:
> Gratuity = (15/26) × Last drawn salary × Number of completed years of service
Where:
- Last drawn salary = Basic + DA
- 15/26 = 15 days wages for each year (as per the Act)
- Years of service = Completed Years rounded down to nearest full year
Example Case Of Calculation: ₹35,000 Salary
An employee was earning a basic salary + DA of ₹35,000/month, with the completion of exactly 5 years of service.
> Gratuity = (15/26) × 35,000 × 5
> \= 0.5769 × 35000 × 5
> \= ₹1,41,346.15
Hence, an approximate amount of ₹1,41,346 shall be paid in gratuity.
New Rule Enhancements
Recent reforms have:
- Made calculation of gratuity more friendly on digital HR platform.
- Ensured the gratuity has to be disbursed within 30 days after exit.
- Imposed tough penalties for delays and wrongful denials of payment.
The maximum gratuity ceiling, set at ₹20 lakh, stays intact, providing good protection for employees with the longest years of service.
Conclusion
This gratuity order is an essential step in the potential financial sustenance of employees post-exit. Over one and a half lakh rupees for just five years of service with an employee’s monthly salary of ₹35,000 is a decent benefit. Employees should ask and keep with themselves their salary records, DA slips, and proofs of duration of service to carry out smooth processing of the claim themselves.
Also Read:8th Pay Commission Fitment Factor And Salary Hike: How Much Will Government Employees Get