HRMAGIX016Performance, progression and payGratuity Policy (Indian Labour Law)
Gratuity eligibility and computation under the Payment of Gratuity Act, and how it is settled on separation.
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Purpose
This policy sets out gratuity eligibility and computation, and how it is settled on separation.
Because gratuity is a statutory entitlement with a fixed formula, the employer's policy is largely a restatement of the law plus the organisation's own administrative process. The provisioning question, recognising the liability before it falls due, is the part that is the employer's.
Who it applies to
Employees completing the qualifying period of continuous service.
Statutory footing
Under the Payment of Gratuity Act, 1972, gratuity becomes payable on completing five years of continuous service, computed at fifteen days of last drawn wages for each completed year, on a twenty-six day divisor. The Act also prescribes the circumstances in which the five-year condition does not apply.
What you write into it
Progression policies fail on process rather than principle. The template provides the cycle and the sequence; the criteria, the weightings and who decides are the parts that make it yours.
- How the organisation administers a gratuity claim, and within what period it settles
- How continuous service is computed where there has been a break
- Whether the organisation provides above the statutory formula
- How the liability is provisioned in the books
What HRMagix records
A progression decision that cannot be evidenced is difficult to defend later. These are the records that support it.
- Provisioning runs before eligibility is reached, so the liability is visible rather than sudden
- Settlement is computed from the same attendance and salary history the rest of payroll uses
- The gratuity calculator on this site applies the statutory formula to figures you enter
Where the rules themselves live
No cycle, rating scale or eligibility period appears above. Those are the employer's criteria, and restating them here would create a second version to keep in step with the approved one. Read HRMAGIX016 in full.