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Salary Cut To Deal With Covid 19 To Have Impact On Your Gratuity Too


Gratuity, i.e. a retirement benefit provided to those who render five or more continuous years of service to an employer, also come at stake for those who are soon to retire. This is being said as the Covid 19 outbreak and consequent disruption on account of it has pushed companies across sectors to take on to pay cut to reduce their fixed cost.

Salary Cut To Deal With Covid 19 To Have Impact On Your Gratuity Too

Gratuity is paid at the rate of 15 days wages depending on the last wage rate of the employee.

And for calculation of 15 days' wages = Monthly rate of wages/ 26 *15

Thus gratuity is calculated as Monthly wage* number of years of service *15/26

As per a SEBI-registered investment adviser the impact on the gratuity will depend on the component of the salary which is changed on account of the salary cut. If the impact or change is seen in case of the basic salary and DA, there will be an impact on the gratuity of the concerned. And if the scope of salary cut is effected out of these two components then there shall be no impact.

But experts from the domain point out that in the wake of Covid 19 crisis, the salary cut has been made for variable pay and other allowances and corporate have shied away from cutting back on basic salary.

Also in order that the employees are not affected and as a reward to their long term of service, companies can even consider computing the gratuity based on the pre-Covid 19 salary.

Read more about: salary gratuity
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