The government has implemented a new labor law in the country. It has made several changes for the benefit of employees. This new law, which came into effect on November 21st, also changes the gratuity rules. This means that the calculation of gratuity will also change under the new law. So, if your salary package is ₹6 lakh, ₹12 lakh, or ₹24 lakh, how much gratuity will you receive under the new rules?
Under the new labor law, two rules have been changed that directly impact the calculation of gratuity. First, both fixed-term and contract employees will now be eligible for gratuity. Such employees will now be eligible for gratuity after completing one year of service. However, for permanent employees, gratuity will still be awarded only after completing five years of service. This means that the new law does not change the tenure rules for permanent employees, but for temporary or fixed-term employees, it has now been limited to just one year.
Gratuity will include many more wages.
Under the new rule, gratuity calculation will now include not only basic salary, but also dearness allowance and other allowances. Gratuity will be calculated by adding 50% of all benefits to the employee. Under the new labor law, if an employee's basic salary increases, their PF and gratuity will also increase.
How will gratuity be calculated under the new Act?
Suppose an employee receives a total salary of ₹70,000 per month, of which ₹30,000 is paid as basic salary and ₹40,000 is paid as other allowances. How much gratuity would be received after 10 years of service? How much would be received if this salary were calculated using the new and old gratuity rules?
Under the current rules: Under the current rules, gratuity would be calculated at ₹30,000. The gratuity formula applied would be ₹30,000 multiplied by 10 years multiplied by 15 divided by 26, resulting in a total gratuity of ₹1,73,076.
Under the new rules: Under the new gratuity rules, any amount over and above the basic allowance will be added back by 50% to the gratuity calculation. This means that the ₹40,000 paid under other items is ₹10,000 more than the basic allowance. Therefore, 50% of this amount, i.e., ₹5,000, would be added to the basic allowance for the calculation. Thus, the basic salary would be Rs 35,000, and the gratuity, using the same calculation formula, would be Rs 2,01,923. This means that under the new rules, the gratuity would be Rs 29,000 more.
How much gratuity would be payable on a CTC of Rs 6 lakh?
Suppose someone's total CTC is Rs 6 lakh per annum, and their basic salary is half of this, i.e. Rs 3 lakh. How much gratuity would a person working for a full year receive under the current and new rules? If half of the basic salary, i.e. Rs 1.5 lakh, is paid as HRA, and Rs 36,000 goes towards PF, then to balance the total salary, the company would have to contribute Rs 99,570 towards other allowances under the current rules, whereas under the new rules, Rs 95,000 would have to be contributed towards other allowances. Therefore, when calculating gratuity, the current rules will only consider the basic salary of Rs 3 lakh. However, under the new rules, gratuity will be calculated by adding Rs 95,000 of other allowances to the basic salary.
How will the calculation be done on a CTC of Rs 12 lakh?
If someone's CTC is Rs 12 lakh, then under the current rules, the basic salary will be Rs 6 lakh. 50% of this, i.e., HRA of Rs 3 lakh, and 4.81% of the basic salary, i.e., Rs 28,860, will be the gratuity contribution. Even after contributing Rs 72,000 to the PF, the company will still have to pay Rs 1,99,140 as other allowances to balance the balance. Rs 1.90 lakh will be paid under other heads. However, under the current rules, only Rs 6 lakh basic salary will be considered for gratuity calculation, whereas under the new rules, gratuity will be calculated on Rs 7.90 lakh.
How to make money with a CTC of 2.4 million?
If an employee's CTC is 2.4 million, 50% of this, i.e., 1.2 million, will be basic salary, and 50% of that, i.e., 6 million, will be HRA. 12% of this basic salary, i.e., 1.44 million rupees, will go into PF. To balance this, under the current rules, 398,280 rupees will be contributed to other items, while under the new rules, 380,002 rupees will be contributed. However, when gratuity is calculated, under the current rules, the calculation will be based only on 1.2 million rupees, while under the new rules, gratuity will be calculated on 15.80 million rupees.
Disclaimer: This content has been sourced and edited from News 18 hindi. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.
