Rule 321: Limit on ordinary annual contributions to a gratuity fund
Rule 321 limits the employer's ordinary annual contribution to a gratuity fund. Rules 316 to 329 govern approved gratuity funds under Part B of Schedule XI to the Act. It must be on a reasonable basis approved by the approving authority, having regard to each employee's length of service, and must not exceed 8 1/3% of each employee's salary in each year.
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Bare law
Rule 321 - Ordinary annual contributions
The ordinary annual contribution by the employer to a fund shall be made on a reasonable basis, as may be approved by the approving authority, having regard to the length of service of each employee concerned, but such contribution shall not exceed 8 1/3% of the salary of each employee during each year.
Rule breakdown
Limits
Reasonable basis approved by the approving authority.
Regard to length of service.
Not above 8 1/3% of salary of each employee each year.
Text note
The notified text prints the figure as a stacked fraction, which appears as 8 1/3%.
Key takeaways
8 1/3% cap
Per employee per year.
Reasonable basis
Approved by the approving authority.
Length of service
Relevant to the basis.
Practical checklist
- Get actuarial support for a reasonable basis.
Avoid
- Do not exceed 8 1/3% of salary per employee.
FAQs
What is the annual cap?
8 1/3% of each employee's salary per year (Rule 321).
Who approves the basis?
The approving authority.
Is there a past-service limit?
Yes, Rule 322.
Glossary
- Ordinary annual contribution
- Regular yearly employer contribution.
- Approving authority
- Defined in Rule 316(a).