Labour law
1 month ago
In supreme court judgement for epf purpose all the allowances are combined with basic salary to calculate pf wages but for the purpose of gratuity ..it considers only basic salary or total salary including allowances?
A.Dear Client,
As per Section 2(s) of the Payment of Gratuity Act, 1972, "wages" means all emoluments that are earned by an employee while on duty or on leave following the terms and conditions of his employment and which are paid or arc payable to him in cash and includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance. In the case of computation of gratuity, the wages or salary includes only basic salary and dearness allowance last drawn by the employee before resignation or retirement. Gratuity = N*B*15/26. Here, N = Number of Years Serviced in the Organization, B = Basic Salary including DA and 15/26. - 15 defines half-month compensation of 15 days and 26 represents the number of working days in a month (excluding Sundays) For example, Amit has worked with a company for 20 years and had Rs.25,000 as his last drawn basic plus DA amount, then, Gratuity Amount for Amit = 20*25,000*15/26 = Rs.2,88,461.54. So, for the calculation of gratuity under the Payment of Gratuity Act, salary/wages include only Basic salary and Dearness Allowance (DA). There won't be any other components that will be considered for the calculation of gratuity and subject to a cap of Rs.20 lakh (tax-free gratuity)
As per Section 2(s) of the Payment of Gratuity Act, 1972, "wages" means all emoluments that are earned by an employee while on duty or on leave following the terms and conditions of his employment and which are paid or arc payable to him in cash and includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages and any other allowance. In the case of computation of gratuity, the wages or salary includes only basic salary and dearness allowance last drawn by the employee before resignation or retirement. Gratuity = N*B*15/26. Here, N = Number of Years Serviced in the Organization, B = Basic Salary including DA and 15/26. - 15 defines half-month compensation of 15 days and 26 represents the number of working days in a month (excluding Sundays) For example, Amit has worked with a company for 20 years and had Rs.25,000 as his last drawn basic plus DA amount, then, Gratuity Amount for Amit = 20*25,000*15/26 = Rs.2,88,461.54. So, for the calculation of gratuity under the Payment of Gratuity Act, salary/wages include only Basic salary and Dearness Allowance (DA). There won't be any other components that will be considered for the calculation of gratuity and subject to a cap of Rs.20 lakh (tax-free gratuity)
Helpful
Helpful
Share
Read Related Answers
Can a company deny experience-relieving letter for violating NDA
Dear Client,
For a breach of the terms of an employment contract, an employer can take legal action against the employee claiming damages arising out of the breach of said contract. But the action of...
Illegal Termination
Dear Client,
From the contents of your query, the management's action, prima facie, appears to be highly arbitrary and illegal and can be termed as victimization and unfair labour practice. When the c...
Employee accident
Dear Client,
Section 3 of the Employees Compensation Act, 1923 deals with the Employer's liability for compensation payable to an injured employee in case the injury is caused in the course of and ari...
Job fraud
Dear Client,
It appears from the query, that you are trapped by a fraudster company by alluring with fake employment that costs you a sum of Rs.2 lakhs. When you are in receipt of an offer letter issu...
Applicability of Factories Act and Shops & Establishments Act for NGOs in Karnataka
Dear Client,
Non-profit organizations/NGOs, even though they may not engage in commercial activities, may still fall within the purview of the Shops and Establishment Act if they provide services or...
Read Blogs on Employment and Labour
Employment and Labour Lawyers
Find Lawyers by Location
