Gratuity is a financial fund which is paid by the employer or the employing organization to the employee in exchange of services under certain conditions as per Income Tax Ordinance and Labor Act.
Gratuity eligibility as per Bangladeshi law: As per Bangladesh Labour Act 2006 (2006 Act) and is defined under section 2(10)-
- as wages of at least 30(thirty) days for every completed year of service and such wages shall be at the rate of the wages the worker received last and
- where any worker has served for more than 10 years, he shall be paid wages of 45 (forty-five) days.
It is worth noting that completion of more than 06 (six) months of service will be deemed as 1 (one) year.
Payment Modality of Gratuity: The confirmed regular employees of Appointed Organization/Company, who have completed a minimum of 12 (twelve) months continuous service with (Appointed Organization/Company) , shall be eligible for a gratuity upon cessation of their employment for any reason other than dismissal for misconduct. The rate of gratuity payment shall be-
After completion of continuous service of first 12 months one (01) basic salary for each completed year of service up to 10 years of service and any period exceeding six months shall constitute a year for the purpose of calculation of the gratuity payment. After completion of service of more than 10 years 1.5 times of basic salary for each year of service and any period exceeding six months shall constitute a year for the purpose of calculation of the gratuity payment.
Formation of Gratuity Fund: Formation of Gratuity Fund as below-
1. Gratuity Fund will be formed in-compliance with Labour Law and Income Tax Ordinance.
2. Gratuity amount to be provided after completion of continuous service of first 12 months one (01) basic salary for each completed year of service up to 10 years of service and any period exceeding six months shall constitute a year for the purpose of calculation of the gratuity payment. Then After completion of service of more than 10 years 1.5 times of basic salary for each year of service and any period exceeding six months shall constitute a year for the purpose of calculation of the gratuity payment. The following must be done:
(a)Organization/Company Employees Gratuity Fund" (hereinafter referred to as the "Fund").
(b)The Deed of Trust must be made.
(c)The Trustees shall not be less than 04 (Four) and not more than 07 (Seven) in number, who shall be ex-officio trustees of the Fund as per designations specified.
Proposed Trustees Board: Proposed Trustees Board as below-
1. Chairman- Group CFO/COO
2. Member- ED/ DGM, F&A
3. Member- CLO/ Manager- Legal Affairs
4. Member- HR & Admin (To be nominated)
5. Member Secretary- Head of Finance or DGM, F&A
Tax Compliance:
- Gratuity Fund (GF) has tax part which requires that it needs to be created separately under a Trust Deed and it has to be approved by NBR.
- Then the Company can claim expense for the amount of gratuity paid to employees as admissible expense.
Tax Compliance: Gratuity Fund (GF) has tax part which requires that it needs to be created separately under a Trust Deed and it has to be approved by NBR.
Then the Company can claim expense for the amount of gratuity paid to employees as admissible expense.
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