An employee receives a monthly Basic Pay + DA of ₹60,000 and a Special Allowance of ₹60,000. According to the Payment of Gratuity Act, 1972, how much gratuity will the employee be entitled to upon completing 10 years of continuous service?

​Gratuity is a statutory benefit given to employees as a token of appreciation for their long-term service. Under the Payment of Gratuity Act, 1972, an employee becomes eligible for gratuity after completing five years of continuous service with the employer. Here, we calculate the gratuity for an employee who has completed 10 years of service and is drawing a monthly Basic + DA of ₹60,000 and a Special Allowance of ₹60,000.

Definition of Wages under the Act (Section 2(s)):
"Wages" for the purpose of gratuity calculation include the following:
 Basic Pay and  Dearness Allowance (DA)
It excludes: Bonus, Commission, HRA, Overtime Wages, Any other allowances like Special Allowance, Conveyance, etc.
​
Since the Special Allowance of ₹60,000 does not form part of the wages under this definition, it is excluded from the gratuity calculation.

​Formula for Gratuity Calculation:

Last Drawn Wages: Basic + DA = ₹60,000 | Completed Years of Service: 10 years
15 days' wages: Standard as per the Act | 26: Considered as the number of working days in a month

Step-by-Step Calculation:

​Final Amount Payable:
₹3,46,154 (rounded to the nearest rupee)

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Shekar Ganagaluru's Books

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K. VITTALA RAO's HR Books