Gratuity
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.
Exemptions
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.
Musonda Speaks HR 
Hi ,suppose someone signed a two year fixed term contract and the employer decides to pay gratuity within one year calculated at only 12 months.what can you advise the employee
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Hi ,suppose someone signed a two year fixed term contract and the employer decides to pay gratuity within one year.what can you advise the employee or employer
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Chitambala’s question on payment of gratuity upon employee’s resignation was not answered.
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Iam working on permanent basis, I would like to resign so that i start working on my own, can the company pay me for 5 years that i have worked for in form of gratuity?
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I once worked in a company on a one year contract but they only gave me gratuity of k 900 , of which my basic pay was k1050 ,anyone to help me ,my phone number 0974850998
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If I have understood… 25% of 1050 ×12months= gratuity
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Your calculations are correct! You have it 😊
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What if the contract i signed states that I can’t get gratuity if I don’t completed my 5 years then I terminate at about 4 and half years.
Can I get anything from them supported by the law?
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They’re a number of dependencies. This Law only came into play in 2019. Additionally the exemptions of 2020, exempt a number of classes of employees from Gratuity.
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Maybe you can assess this document… and advice if I can get something or am to forfeit.
Your assistance will highly be appreciated
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I’m not sure if I’m qualified to make a final decision, I would recommend you consult a labour officer that way they would even guide you on next steps.
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So gratuity is calculated by months and not years? Your guidance please.
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i want to know why employees on probation are not entitled to gratuity? may i know the minimum the law provide for on this? (the law is clear that gratuity is at 25% and there is no exclusion clauses attached)
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Good article,i would love to receive your articles ,or luther would love to follow your work,how do i register
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Define termination. Supposing I resign on my own accord before end of my long term contract, do I receive gratuity prorated or it is only when the employer terminates my contract?
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Hi, Chitambala. You receive gratuity on a prorata basis even if you are the one who terminates.
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And thank you for this article. It has been very clear and helpful. Really appreciate
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At redundancy is an employee entitled to Gratuity.
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Does it mean that an employee whose probation is unsuccessful is not entitled to gratuity?
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Yes, precisely!
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Kindly advise on new gratuity S.I meeting on the 11.05.2020 on gratuity.
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Kindy advise what the new S.I from the 11 05 2020 affects gratuity payment?
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Hi Kufanga, check out my latest article.
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There has been debate on when this 25% can actually be calculated should the HR calculate the 25% starting when it was enforced in 2019 or 2020 since the government gave a 1 year probation for the same.
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Indeed and it is still ongoing.
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Musonda kindly send me your email address I need your guidance.
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Is there any difference on how exit package is calculated between redundancy and retrenchment?
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Well I might be wrong but retrenchment is not an official process in the Employment Code.
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What happens if I resigned and am permanently employed and in the signed Ts n Cs there is a close about pension to be introduced.
If I have worked for over a year and this pension scheme has not been introduced…. Do I deserve a certain pay
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Gerald, I equally need guidance on this matter. Suppose one works for 10 years plus on permanent and pensionable basis and resigns out ones accord, what payments is he entitled to apart from leave days pay?
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Thanks Musonda quite an insightful article. How does severance apply with respect to resignation or dismissal?
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