Hi,
Can anyone send me gratuity rules and regulation?
Thanks’
Nirmal
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Hi Nirmal, Gratuity is governed by the Payment of Gratuity Act, 1972. It is a statutory benefit provided to employees as a form of gratitude for their services rendered to an organization. Here are the key rules and regulations regarding gratuity in India:
Eligibility:
- The Payment of Gratuity Act applies to establishments having 10 or more employees in the preceding 12 months.
- An employee is eligible for gratuity if they have completed a minimum of five years of continuous service with the same employer. However, in case of death or disablement, the five-year requirement is not applicable.
Calculation:
- The gratuity amount is calculated based on a formula: Last drawn salary × 15/26 × Number of years of service.
- Here, “last drawn salary” refers to the basic salary and dearness allowance. The 15/26 fraction represents 15 days out of 26 working days in a month.
- The number of years of service is rounded off to the nearest full year. If an employee has completed more than 6 months in a year, it is considered as a full year of service.
Maximum Limit:
- As of September 2019, the maximum gratuity amount that can be paid to an employee is ₹20 lakhs. This limit is subject to change if the government amends the Act.
Payment:
- Gratuity is payable to an employee within 30 days from the date it becomes payable. If not paid within this period, the employer needs to pay interest on the amount due.
Termination and Resignation:
- If an employee resigns or is terminated for reasons other than misconduct, death, or disablement, they are still eligible for gratuity if they have completed five or more years of service.
Nomination:
- An employee can nominate a family member or beneficiary who will receive the gratuity in case of the employee’s death. If the employee has a family, at least 50% of the gratuity amount should be given to the spouse and children collectively.
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Hi @vikashbtpl ,
When the Gratuity Form F should be filled by an employee ?
Also as you mentioned that in case of death or disablement, the five year completion requirement is not applicable. what is the meaning of this ? please explain.
Regards,
Neha
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Gratuity Form F: Gratuity Form F is a form used to apply for gratuity by an employee who is about to retire or leave their job. It’s a formal request submitted to the employer to claim the gratuity amount that the employee is entitled to receive based on their years of service. This form is typically submitted by the employee to their employer a few weeks before or after their retirement or departure.
Five-Year Completion Requirement and Exception: As per the Payment of Gratuity Act in India, employees are eligible to receive gratuity if they have completed a minimum of five years of continuous service with the same employer. This means that if an employee has worked for a particular employer for five or more years and then leaves the job, they are entitled to receive gratuity.
However, there’s an exception to this rule. In cases of an employee’s death or disablement, the requirement of completing five years of service is not applicable. This means that if an employee dies or becomes disabled due to an accident or illness before completing five years of service, their legal heirs or the disabled employee are still eligible to receive gratuity.
In essence:
- For regular cases of resignation or retirement, an employee needs to have completed five years of service to be eligible for gratuity.
- In cases of an employee’s death or disablement, even if the employee hasn’t completed five years of service, their legal heirs or the disabled employee are entitled to receive gratuity.
This provision is in place to provide financial support to the families of employees who pass away or become disabled during their service, recognizing their contribution to the organization.
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Thanks for the information shared…
Really appreciate it…
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Thankyou for the response but as per my knowledge Form F is for nomination not for claim. Kindly revisit this and let me know when it should be filled by an employee (at the time of joining or after few months or years)
so for an example in case of death or disablement if the employee has completed 6 months or 1 year with the company then too it is payable ?
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@vikashbtpl well explained and covers most aspects of PGA
one minor correction, maximum limit on gratuity is only for income tax exemptions.
A company may pay any amount as gratuity. But the tax free limit is INR 20L. beyond 20L, the amount shall attract tax at normal slabs.
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I apologize for any confusion. You are correct; Form F is indeed related to the nomination of beneficiaries for gratuity in the event of an employee’s death. It is not directly related to the claim process.
Regarding the eligibility for gratuity in case of death or disablement, let me clarify further:
Yes, in the case of an employee’s death or disablement, even if the employee has completed as little as 6 months or 1 year with the company, the gratuity is still payable. The requirement of completing 5 years of continuous service is not applicable in such situations.
The Payment of Gratuity Act in India makes provisions to ensure that if an employee unfortunately dies or becomes disabled during their service, their legal heirs or the disabled employee themselves are eligible to receive the gratuity amount, regardless of the duration of their employment. This is done to provide support to the family or the disabled employee during difficult times.
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Dear Team,
As per trail mail, please find the link to get exact rules and regulations about Gratuity.
Gratuity Calculator - Calculate Gratuity Online | ICICI Direct)%2F30.
Regards**,**
HR
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Thankyou for the response, please let me know when it should be filled by an employee (at the time of joining or after few months or years)
Also if an employee has completed 4.6 yrs at the time of leaving the company then he is eligible to get the gratuity for 5 yrs or he is not eligible ?
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Hello @vikashbtpl @Renjith @JeyaKeerthi ,
Greetings of the day!
I am writing to seek clarification regarding the applicability of the gratuity act for our sister company that has less than 10 employees.
Recently, I noticed that the sister company includes gratuity in their employees’ salary break up as a cost to the company. However, I am unsure if the gratuity act is applicable in their case.
Considering the aforementioned scenario, I would like to inquire whether an employee of the sister company can claim the gratuity amount even if they have not completed five years of service. It would be greatly appreciated if you could provide guidance on this matter.
Thankyou in advance!
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Thank you very much.
NS
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@vikashbtpl waiting for your valuable response
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Hi Nehat,
Nomination Form (Form F): Employees should ideally fill out the nomination form (Form F) at the time of joining the company or shortly thereafter. This form allows employees to nominate their beneficiaries who would receive the gratuity amount in case of the employee’s death. It’s a good practice to ensure that this form is filled out early to avoid complications later.
Gratuity Eligibility: In the case of an employee who has completed 4.6 years of service at the time of leaving the company, they would generally not be eligible to receive gratuity for 5 years. Gratuity eligibility is usually determined based on the completion of the full 5 years of continuous service. If an employee has not completed the full 5 years, they may not be eligible to receive gratuity.
However, there could be specific legal provisions or company policies that vary in different situations or jurisdictions. It’s recommended to refer to the Payment of Gratuity Act and any relevant policies of the company to understand the exact eligibility criteria and calculations for gratuity. If there are any doubts or concerns, consulting with legal experts or HR professionals can provide accurate guidance based on the latest regulations and rules.
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In the case of an employee’s death or disability , the nominee is generally eligible to receive the gratuity based on the employee’s actual working period, not necessarily for the full 5 years. The gratuity amount is calculated based on the length of the employee’s service up to the point of their death.
For example, if an employee worked for 3 years and unfortunately passed away, the nominee would be entitled to the gratuity amount calculated for the 3 years of service. The requirement of completing 5 years of service doesn’t apply in such cases, as the purpose of this provision is to provide financial support to the family or dependents of the deceased employee.
It’s important to review the specific terms outlined in the Payment of Gratuity Act and any company policies to understand the exact calculations and eligibility criteria for gratuity in case of death. Laws and regulations can vary, and consulting legal experts or HR professionals can provide accurate guidance based on the latest rules and provisions.
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Hi Team,
I have a query. If an employee completes 5 years & 10 months of continuous years of service in an organization, what should be considered as the no of years of service while calculating Gratuity for the concerned employee? 5 years or 5years & 10 months or 6 years?
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@Sudeshnadas it considered 6 years.
For example: If Services is 5years less than 180 days means Gratuity will be calculated 5 years, If Services is 5 years more than 180 days means Gratuity will be calculated 6 years
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