Method of calculation

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18 November 2015 what is method of calculation of

Bonus
Leave Encashment

Gratuity

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KAVIRAJA ADDANGADI

KAVIRAJA ADDANGADI (Expert)
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18 November 2015 The bonus ceiling under the legislation was increased from 3500 rupees to 7000 rupees per month.
• The wage ceiling for getting bonus has also been increased from existing 10000 rupees per month to 21000 rupees per month.
Minimum Bonus 8.33% of Basic i.e Rs.7000 PM to be calculated for the year or Rs.100

Every employee not drawing salary/wages beyond Rs. 10,000 per month who has worked for not less than 30 days in an accounting year, shall be eligible for bonus for minimum of 8.33% of the salary/wages

Section 2A of the Act provides the definition of “continuous service” which says that service been uninterrupted for that period, interruption which may on account of sickness, accident, leave, absence from duty without leave not being absence in respect of which an order treating the absence as break in service has been passed. For the period of one year employee is deemed to have rendered continuous service for 240 days.

Formula for the calculation of Gratuity:

Gratuity = Last drawn month’s salary x 15days

_____________________ x Number of service years completed

26

Gratuity is calculated at 15 days wages last drawn by the employee for each completed year of service. The monthly wage is divided by 26 and multiplied by 15. In computing a completed year of service the period in excess of six months shall be taken as a full year.

For seasonal workers the formula for the calculation of gratuity is

Gratuity = Last drawn month’s salary x 7days

_____________________ x Number of service years completed

26

Leave encashment

Annual leave encashment = (leave days x 12) x (Gross Salary x 12 / 365)

ash equivalent of leave at the time of retirement or resignation = { ( ( ( Y * C) – A ) / 30) * S }

‘Y’ is No of completed Years of service (you need to exclude part of an year, if any).
‘C’ is total no of leaves Credited per year. If company provides 40 leaves per year, for calculation purpose we need to take 30 leaves only.
‘A’ is total no of leaves Availed during the service (total no of leaves minus no of leaves that were encashed).
‘S’ is average salary for last 10 months.