Employees working in private sector get the benefit of gratuity. But some rules have been fixed for this. Employees can avail the benefit of gratuity even without completing five years. Know what the rules say regarding gratuity.
The government has indicated changes in gratuity in the new labor code, but at present nothing is completely clear. People working in the private sector have many questions regarding gratuity. The biggest question among these is whether the gratuity money will not be received before the completion of five years? We have brought answers to all such questions for you.
What is gratuity and who gets it?
First of all, let us know what is Gratuity and whether it is available to all the employees working in the private sector? Gratuity is given to the employees by the company. In a way, instead of continuous service, the company expresses gratitude to its employees in the form of gratuity. The Payment and Gratuity Act is applicable to all factories, mines, oil fields, ports and railways in the country. Along with this, gratuity benefits are given to the employees working in the shops as well as in the companies employing more than 10 people.
What does Gratuity Act say?
Employees who have worked continuously for five years in any company are considered eligible for gratuity. But in some cases, employees get the benefit of gratuity even with less than five years of service. ‘Continuous work’ has been clearly defined in Section 2A of the Gratuity Act. According to this, many employees can get the benefit of gratuity even if they have not worked for full 5 years.
Gratuity is available for less than five years
According to Section-2A of the Gratuity Act, employees working in underground mines become eligible for gratuity if they have worked continuously for 4 years and 190 days with their employer. Whereas, employees working in other organizations are eligible for gratuity after working for 4 years 240 days (i.e. 4 years 8 months). Let us tell you that the notice period is counted in ‘continuous service’. That’s why the notice period is also added to the gratuity.
How is the amount of gratuity calculated?
Total gratuity amount = (last salary) x (15/26) x (number of years worked in the company). Suppose you worked in the same company for 7 consecutive years. The final salary is Rs 35000 (including basic salary and dearness allowance). So according to the calculation (35000) x (15/26) x (7) = Rs 1,41,346. An employee can get gratuity up to a maximum of Rs 20 lakh.
