What is Gratuity

Sponsored Links

 Gratuity is a portion of earnings given by an employer to his or her employee as an appreciation of the good services offered during the working duration at the company. There is a criteria used indetermination of the employee who is most suited to receive the gratuity. The standards include if the employee has served for a duration of at least five years or even more offering continuous service. This is also applicable to individuals who are in the following periods;

  • Superannuation period
  • Retirement period
  • Registration period
  • In case of death or disabilities brought about by either a serious disease or accidents. The 5 years period is not a necessary condition in case of a fatal death or even disablement.

Under this umbrella the amount that is payable to an individual according to 1972 Act is computed as

  • A person is required to take his or her last month’s wage [basic]. In the case that a person is entitled to dearness allowance, he or she should be given[basic wage + DA]
  • After ward divide the amount you have obtained above by 26 [26 represents the working days in a month]
  • Then multiply the results from above by 15
  • After getting the answer, multiple the solution by the amount of years you have rendered the service. The results obtained here will be your gratitude amount entitlement
Sponsored Links

An example:

  1. If you basic salary plus DA is Rs. 26000
  2. You are to divide that amount by 26: 26000/26=1000
  3. Then multiple the answer by 15: 1000 X 15=Rs.15000
  4. If you have worked for 8 years. You are have: 15000 X 8= Rs. 120000. Therefore a person will be entitled to Rs.120000

There are different circumstances that can easily disrupt the payment understanding of the gratuity. For example an employee has worked for the same employer but at different organization due to many reasons. That person if fully eligible for the payment since both companies are under similar management. The employee ought to have worked for a period of more than 5 years in both companies.

This payment has an advantage since it motivates employees to remain with the same employers for a long period of time without quitting or moving to another organization. The employees are able to offer the best kind of service they can deliver since they know at the end of the working period. They are entitled to a reward. This form of payment is also encouraged since in case of retirement, this gratuity will be added on the pension money therefore, the amount of money a person would have access to in his or her old age will be enough to enable that person live a more comfortable life.

Employees should be able to calculate their own gratuity amount with ease since it’s not a difficult task to carry out. Therefore, a good relationship between an employee and an employer should be established so as to enable an individual to get this kind of payment when he or she leaves an organization. As it is said at the end of the day, patience pays.

Posted in EPF.