Gratuity Policy
When a man leaves, somebody has to answer "how much gratuity does he get". This screen holds that answer once, as days of pay per year of service, so his final settlement prices itself instead of being typed by hand.
What it is for
A gratuity policy is a rate, not a list of people. It says: for each year a man has served, he is owed so many days of pay, and the pay in question is this salary figure. The final settlement works out his length of service from the dates on his own record, then asks this policy what a year of it is worth.
The pricing goes like this. The length of service picks a line on the Service Slabs tab, the one whose From Service is the highest that is still at or below his years. That line's Days Per Year of Service is the rate. If no line matches, or there are no lines at all, the Days Per Year on the header is used instead, which is how a flat policy is written. Below the Minimum Service the entitlement is nothing, and the gratuity line is left on the settlement at zero rather than removed, so it is visible that it was considered.
Whole years or part years is the Pro-rate Part Year tick. With it off, eight years and nine months is credited as eight years. With it on, it is credited as eight point seven five.
The basis is the monthly salary figure the days are taken out of, read as it stood on the man's last working day rather than as it stands today, so a settlement prepared weeks after an exit does not pick up a salary revision he never worked under. A month is treated as thirty days when the monthly figure is turned into a daily one, which is how these policies are normally written.
Two things on this screen are recorded and are not acted on, and it is better to know now than to find out during a settlement. The four Payable On ticks document when the client's policy says gratuity is due, and at least one of them must be ticked before the record can be saved, but nothing withholds a gratuity because a separation was a resignation rather than a retirement: the reason a man leaves is typed as free text, so there is nothing for the system to match them against. Count Probation is recorded in the same way, and the length of service comes from the dates on the man's record. Both are worth filling in honestly, because the person preparing a settlement reads them.
Every field, in plain words
Policy
| Field | What it means | What to put in it | Notes |
|---|---|---|---|
| Gratuity Policy | The code | STAFF, WORKERS | Required |
| Description | How the policy reads in a list | Staff gratuity, 30 days per year | Required |
| Contribution Basis | Which monthly salary figure the days are paid out of | BASIC or GROSS | Required. This is a typed field with no list. BASIC uses basic salary and GROSS uses gross salary. Any other value makes the system use the Wage Type named below instead |
| Wage Type | The single salary line to use as the basis | 1000 Basic salary | Pick from the list. Needed only when the basis is not BASIC or GROSS. Without it, such a policy prices nothing and leaves the figure to the preparer |
| Active | A flag for your own records | Tick it | The settlement does not test this flag, so unticking it will not take the policy out of use. Stop naming it instead |
Entitlement
| Field | What it means | What to put in it | Notes |
|---|---|---|---|
| Minimum Service (Years) | How long a man must have served before any gratuity is due | 1 | Required. Below it the gratuity comes out at zero. It cannot be negative |
| Days Per Year of Service | The flat rate, used when no service slab matches | 30 | Required, unless you are defining the rate entirely in service slabs. Between 0 and 365 |
| Count Probation | Whether probation counts as service | Tick it if the client says so | Recorded for the reader. The length of service is taken from the dates on the man's record |
| Pro-rate Part Year | Whether an incomplete year is paid in part | Tick it. Most Pakistani policies do | Off means the part year is dropped, so 8 years 9 months pays 8 years |
| Remarks | A note for whoever reads this next | The policy document or the clause number this comes from |
Payable On
| Field | What it means | What to put in it | Notes |
|---|---|---|---|
| Payable on Resignation | The client's policy pays gratuity to a man who resigns | Tick as the policy says | Documented only, nothing is withheld on it |
| Payable on Termination | It pays a man who is terminated | Tick as the policy says | Documented only |
| Payable on Retirement | It pays on retirement | Tick as the policy says | Documented only |
| Payable on Death | It pays on death in service | Tick as the policy says | Documented only. At least one of the four must be ticked to save |
Service Slabs
Leave this tab empty for a flat policy. Fill it when the rate improves with length of service.
| Field | What it means | What to put in it | Notes |
|---|---|---|---|
| Line # | The line number | Fills itself | Leave it |
| From Service (Years) | The shortest service this band covers | 0, then 5, then 10 | Required. Bands must meet exactly |
| To Service (Years) | The longest service it covers | 5, then 10, then 0 on the last line | Zero on the last line means no upper limit. To Service must be greater than From Service |
| Days Per Year of Service | The rate for a man whose service falls in this band | 20, then 30, then 45 | Required on a line. Between 1 and 365 |
| Remarks | A note about this band |
A gap between two bands is a length of service that pays nothing, and an overlap is one that would pay twice, so both are refused when you save.
A worked policy
A staff policy of 30 days of basic pay per year, with one year minimum service and part years counted.
A supervisor on 60,000 basic leaves after 8 years and 9 months. Part years are counted, so 8.75 years are credited. The rate is 30 days per year, which is 262.5 days of pay. His daily figure is 60,000 over 30, which is 2,000. His gratuity is 525,000 rupees.
With Pro-rate Part Year unticked, the same man is credited 8 years, 240 days, and 480,000 rupees.
How to configure it
- Get the client's written policy in front of you, including whether part years are paid and what the minimum service is.
- Create the record: code, description, and the basis. Type
BASICorGROSS. - If the basis is a particular salary line rather than basic or gross, pick that Wage Type.
- Fill Minimum Service (Years), and the flat Days Per Year of Service if the rate does not change with service.
- Tick Pro-rate Part Year unless the client genuinely drops part years.
- Tick the Payable On boxes that match the written policy, at least one, so the person preparing a settlement can read the rule.
- If the rate improves with service, add the slabs on the Service Slabs tab, starting at 0, each From Service continuing where the one before ended, and the last line's To Service left at 0.
- Save, then prepare one test final settlement for a long serving man and check the gratuity line against the policy by hand.
Scenarios
"Thirty days of basic for every year, after one year of service"
The simplest case and the most common. Basis BASIC, Minimum Service 1, Days Per Year 30, Pro-rate Part Year ticked, no service slabs at all.
"Workers get more the longer they stay"
Leave the header rate as the fallback and build the Service Slabs tab: 0 to 5 years at 20 days, 5 to 10 at 30 days, 10 to 0 at 45 days. The man's service picks the band, and the band's rate is used in place of the header's.
"Office staff and factory workers are on different policies"
Two records, and the right one named on the man's final settlement.
"The gratuity on this settlement is wrong, we want to type it ourselves"
A figure typed on the gratuity line is kept. The policy only prices a line that is still blank, so a preparer who has a reason to override is not fought with.
What it is connected to
- Read by the Final Settlement of a man who is leaving, which is the only place a gratuity is paid.
- Length of service comes from the dates on the man's own record, as the settlement works them out, not from anything on this screen.
- The basis amount is read from his salary as it stood on his last working day, so a later revision does not change a settled figure.
- Needs a Wage Type only when the basis is neither basic nor gross.
- Nothing here is read by the monthly payroll run. Gratuity is a leaving payment, not a monthly one.
If something looks wrong
- "The gratuity line came out at zero" - his service is below the Minimum Service, or neither a service slab nor the header has a Days Per Year, or the basis could not be read from his salary record.
- "It will not save and asks for Days Per Year" - give the header a rate, or add at least one service slab.
- "It will not save and says the slabs overlap, or leave a gap" - two bands cover the same year, or none covers it. Each From Service must continue where the previous To Service ended.
- "It will not save and asks for a separation reason to be payable" - tick at least one of the four Payable On boxes.
- "A man who resigned was paid gratuity and our policy says he should not be" - the Payable On ticks are documentation. The settlement does not withhold on them, so the preparer has to zero the line.
- "The gratuity used the wrong salary" - the basis is not
BASICorGROSS, so the system used the Wage Type named on the policy. Check which line that is. - "We unticked Active and it is still being used" - the flag is not tested. Remove the policy from the settlements that name it.