Gratuity Law in India
- A person can only receive gratuity if he has completed at least five years of service with an organization. It can, however, be paid before an employee dies five years or if he has become disabled due to accident or disease
- Amount of Gratuity Payable – Calculation method:
- Gratuity payable = 15 days wages x No completed years of service.
- Why are 15 and 26 free of charge calculated?
- Gratuity depends on the cumulative amount of years spent with the company and the final paycheck earned. Gratuity = A*B*15/26; 15 being compensation for 15 days and 26 being the days of the month.
- What's the current Gratuity Limit?
- Rs. 10 Lakhs
- 2. The official top limit on gratuity is Rs. 10 Lakh. The regulations on gratuity for Central Government workers under Federal Civil Services (Pension) Law, 1972, are also identical.
- The Payment of Gratuity Act, 1972 ('Act') as a social security statute was passed to provide the contractor with a cash reward upon retirement. The disagreement between the parties emerged when, upon retirement, the Employee made a claim for a greater rate of gratuity than the sum charged by the Employer. The Employee argued that his gratuity had to be determined on the basis of the gratuity scheme formulated by the Company and not on the provisions of the Act. The Supreme Court held that, in order to apply Section 4(5), there must be better conditions of gratuituity available to employees.