You can get a higher gratuity after the new labor code; know how to calculate it

Once the new wage code is implemented, some employees should see their wages restructured; companies are required to pay at least 50% of the salary as a base salary. In cases where the base salary is lower than the required mark, employers may have to restructure the salary to comply with the new rules of the four labor codes, namely the industrial relations code, the safety code, health and working conditions at work, the social code Safety code and wage code. An increase in the base salary will also result in a higher bonus for employees because the calculation of the bonus is based on the base salary.

“A salary increase resulting from the restructuring will also lead to an increase in employee rewards. However, the formula for calculating the bonus remains the same in the Social Security Code, 2020. “The formulas for calculating the bonus remain similar to that provided for by the law of 1972 on the payment of the bonus, ie 15 days of salary (or the number of days that can be notified by the central government) for each full year of service, on the basis of the last rate of salary received by the employee concerned, subject to a ceiling to be set by the central government “said Manishii Pathak, Founding Partner, Anhad Law.

In case of gratuity, for each year of service, the organization must pay an amount equal to 15 days of the last salary deducted. The salary here is considered the base salary plus the cost allowance. In addition, if a person works for more than 6 months during the last year of service, it will be considered as a full year for the calculation of the bonus. For example, if a person completes seven years and six months of continuous service, the bonus paid will be eight years.

For the calculation of the gratuity, one month of work is equivalent to 26 days. Thus, the 15-day salary will be calculated as follows: (monthly salary x 15) / 26. This number multiplied by the number of years of service will be the amount of the bonus payable. As the base salary increases, the bonus payment will also increase.

Another change proposed in the social security code is the extension of free access to fixed-term employees as well. “The draft social security code, 2020, extended the benefit of the gratuity to fixed-term employees, regardless of the length of their employment, obliging employers to pay compensation to fixed-term employees even if they are employed for less than five years, ”Pathak said.

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