Gratuity has always been a bit of a sore subject. Some organisations give it, others don’t. Some give 5%, others give 30%. Who decides!?
The act has explicitly stated that an employer shall pay gratuity under the two following circumstances;
- At the end of a long-term contract period.
- When an employees contract is terminated where it shall be paid on a prorated basis.
At the rate of not less than 25%.
Severance Pay & Packages
According to the act, severance pay shall be paid in the following instances with the prescribed calculations;
- Medical Discharge – lump sum of not less than three months basic pay for each completed year of service.
- Death in Service – two months basic pay for each year served under the contract of employment.
- Redundancy – a lump sum of two basic pay for each year served under the contract of employment.
- Expiry of a Fixed Term Contract – twenty five percent of an employee’s basic pay earned during the contract period or the retirement benefits provided by the relevant social security scheme that the employee is a member of.
- Termination of a Fixed Term Contract – gratuity at the rate of not less than twenty-five percent of the employee’s basic pay earned during the contract period as at the effective date of termination.
The following class of employees are from gratuity and severance pay;
- Casual Employees
- Temporary Employees
- Employees on probation
For more on the Employment Code Act No.3 of 2019, checkout Part 1 & 2, and lookout for more over the next 5 days.