Calculation of Gratuity Amount Payable: [Section 4(2)]
1. In the establishments other than seasonal establishments- the employer shall pay the gratuity to an employee at the rate of 15 days wages based on the rate of wages last drawn by the employee concerned for every completed year of service or part thereof in excess of 6 months. In case of piece- rated employee, daily wages shall be computed on the average of the total wages received by him for a period of three months immediately preceding the termination of his employment, and, for this purpose, the wages paid for any overtime work shall not be taken into account.
2. In case of an employee who is employed in a seasonal establishment can be classified into two groups
♦ those who work throughout the year &
♦ who work only during the season.
The former who are the monthly rated employee are entitled to get the gratuity at the rate of 15 days wages for every completed year of service or part thereof in excess of six months. The later are, however, entitled to received gratuity at the rate of seven days’ wages for each season.
In case of a monthly rated employee; the fifteen days’ wages shall be calculated by dividing the monthly rate of wages last drawn by him by twenty-six and multiplying the quotient by fifteen. In order to arrive at the figure of daily wage for the purpose of Section 4(2) of the Act, monthly wages is to be divided by 26 (Hindustan Lever Ltd. Vs Kasargod Devidas Rao, (1990) 61 FLR 6 231 (BOM)
Amount of Gratuity Payable: [Section 4(3)]
The Payment of Gratuity(Amendment ) Act,2010 has amended section 4(3) of the Payment of Gratuity Act, 1972 by which the maximum amount of gratuity payable to an employee shall not exceed rupees ten lakhs. This amendment has become effective from 24th day of May , 2010 as per the Notification No. S.O.1217(E) of the Ministry of Labour and Employment(Earlier the ceiling on the gratuity amount was rupees three lakhs fifty thousand).
Computation of Gratuity of disabled employee : [Section 4(4)]
When an employee becomes disable due to any accident or disease and is not in a position to do the same work and re-employed on reduced wages on some other job, the gratuity will be calculated in two parts –
(i) For the period preceding the disablement: on the basis of wages last drawn by the employee at the time of his disablement.
(ii) For the period subsequent to the disablement: On the basis of the reduced wages as drawn by him at the time of the termination of services.
In case of Bharat Commerce and Industries Vs Ram Prasad, 2001 (LLR 918 (MP) it was decided that if for the purposes of computation of quantum of the amount of gratuity the terms of agreement or settlement are better than the Act, the employee is entitled for that benefit but the maximum statutory ceiling limit as providing under Section 4(3) of the Act cannot be reduced by mutual settlement or agreement.