Northspread
Archive / Investment Adviser (Level 2) / Retirement Products
nism-series-xb-gratuity-seasonal-establishment-7-days-wages[ INVESTMENT ADVISER (LEVEL 2) ]

Under the Payment of Gratuity Act, 1972, how is statutory gratuity calculated for employees in 'Seasonal Establishments' (e.g. sugar mills, tea plantations)?

[ A ]Gratuity is calculated at the rate of SEVEN (7) DAYS' WAGES for each season of service completed by the employee.[ CORRECT ]
[ B ]15 days' wages for each 26-day month (Standard non-seasonal formula).
[ C ]Zero gratuity is payable to seasonal workers.
[ D ]Full annual salary for every season.
Takeaway

The correct answer is A: for employees in seasonal establishments like sugar mills or tea plantations, the Payment of Gratuity Act computes gratuity at 7 days' wages for each season of service completed, rather than the standard 15-day formula.

Derivation
The Act recognizes that seasonal workers don't accrue continuous year-round service the way factory or office employees do, so applying the standard 15 days per 26-day month formula would misrepresent their actual working pattern. Section 4(2) instead prescribes a season-specific formula: 7 days' wages for every season the employee has worked, reflecting the shorter, cyclical nature of seasonal employment while still preserving their statutory entitlement to gratuity. Candidates are commonly tested on whether they know this carve-out exists separately from the standard formula used for non-seasonal establishments.
Why the others fail
B — 15 days' wages for each 26-day month (Standard non-seasonal formula).
This is the standard formula for non-seasonal establishments; seasonal workers instead use 7 days' wages per season, not 15 days per 26-day month.
C — Zero gratuity is payable to seasonal workers.
False; the Act specifically provides a 7-days-per-season gratuity formula for seasonal establishments, it does not exclude them entirely.
D — Full annual salary for every season.
Fabricated; no full-annual-salary-per-season rule exists -- the statutory formula is 7 days' wages per season completed.