Every HR professional, be it a fresher or an individual with years of experience, should learn and grasp clear knowledge about organizational laws. It’s no news that HRs play a vital role in every organization. They are certainly responsible for a number of duties that in turn make it even more crucial for HR managers to learn and understand every crucial law. Now, there are a host of important acts in our country that is compulsory for the whole corporate world to follow. One such organizational law is gratuity!
In this blog, we will tell you everything about the gratuity that you should know about.
Take a look!
Definition
Gratuity is given by the employers to their employees for their services over a period of time. In simpler words, it is a token of appreciation particularly for working individuals for their commitment and performance. Although it is normally given at retirement, you can even request for the same earlier as well but in two particular circumstances (keep reading to know them).
Calculation
Let's start with some important facts. the whole calculation depends on two factors of employees, that are-
- Their total employment period
- Their last drawn salary
Formulae- last drawn salary X no. of the employment period
To make your process easier, you can even search and find a gratuity calculator on the internet. Using a gratuity calculator, you will just have to enter the information asked there and you will know the total amount of gratuity in a matter of seconds.
Tax
As per the Income-tax Act, 1961, the gratuity amount is exempted from tax up to a certain limit.
Eligibility Criteria
You may think there is a long list of conditions for gratuity payment; however, it is not true. On the contrary, there is only one condition that should be met by an employee to avail his or her gratuity. He or she must have completed a total of 5 years of employment period in the company.
In addition, it is equally vital to note that this amount can be paid before completing 5 years as well. If the person dies or becomes disabled, then the payment can be made earlier.
Besides, every employer has the right to forfeit a gratuity payment both entirely as well as partially. This can happen only if an employee was fired due to wrong/unprofessional actions or when he/she tried to physically harm another worker during his service.
That is it! We have come to the end!
See, we told you, it is not as difficult as it seems to be.
We hope this blog helped you to understand more about gratuity. We are sure you now will be feeling super confident with the whole concept of gratuity.
As an HR professional, it is your responsibility to remember the aforementioned points and educate your employees about the same. Do not forget that you can easily get a gratuity calculator on the internet instead of spending a large chunk of time as well as energy on gratuity calculations.
