Gratuity

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Gratuity is a lump sum payment given by the employer on resignation or retirement or death. It is a mark of recognition to the employee's service.

In India, as per the Payment of Gratuity Act, 1972, it is mandatory for all companies with employee strength of 10 or more employees to pay Gratuity. The provisions of the Act state that every employee who has completed 5 years of service with an organization is eligible to get the gratuity as per the pre-defined formula as given in the Act. The benefit is non-taxable up-to a ceiling of INR 10 lakhs.

Accounting standard classifies this benefit as a Post Employment Benefit and requires an Actuary to value these benefits for measurement, recognition and disclosures in the Financial Statements

Leave valuation

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During the course of an employment, an employee accrues leave. These leaves are to be exercised in accordance with the prevalent rules and company policy. There are different kinds of leave generally granted by the companies. Some examples are Casual leave, Earned/Privilege leave, Maternity leave, Sick leave and others.

If the leaves can be carried forward to the future years either for the purposes of utilization or for encashment, then the accounting standard categorizes such leaves as "Other Long term benefits". An entity is required to make provision in the books of accounts from a Actuary in respect of these benefits to comply with accounting standards and good corporate governance practices.

Pension valuation

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Most of the government organizations provide pensions to their employees are retirement. Since pension benefits are not mandatory for private companies, only few employers in private sector provide pension to their employees.

Pension is typically given to employees to ensure a stable livelihood post retirement. An actuary is required to value the pension liability for the company based on the pension rules. The measurement, recognition and disclosures in the Financial Statements will be on similar lines to Gratuity/ End of Service Benefit.

Provident Fund valuations

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Provident Fund is a defined contribution scheme where the employer and employee contribute a fixed sum to Employees Provident Fund Organization.

If the provident funds have an exempt status, then the responsibility of provision of benefits rests in the hands of the employer. Employer needs to ensure that fund earns at least equivalent to EPFO rate or better.

An Actuary is required to certify the sufficiency of the funds and provision be made in the books of the employer for any shortfall in the funds.

ESOPs & Retention Bonus Schemes

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In India, many companies have given ESOPs to their employees. ESOPs help ensure alignment of goals of the management and shareholders. We help companies design ESOP and other loyalty bonus schemes and value them for accounting and other purposes.

Design, Re-Design & Drafting of Employee Benefit Schemes

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Employee benefits schemes should be stitched with a lot of care and diligence as they help defining employer-employee relations and have regulatory implications.

Owing to our core expertise in this domain, we provide clients with a 360 degree view of all stakeholders of scheme advantages and disadvantages and budget their current and future costs.

Other related services

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Pricing & Product development

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Reserving & Statutory valuations

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Bonus estimation for 'participating' portfolio

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Experience Analysis

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Investments

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Others

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Pricing & Product development

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Reserving & Statutory valuations

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Experience Analysis

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Investments

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Others

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KNOWLEDGE CENTER

Sep 2
Sep 2

Is Gratuity Provision required if employees /companies have not completed 5 years?

Question in hand While identifying/analyzing the employee benefits for which measurement, recognition and disclosures are required, we are often encircled by queries from our clients on whether gratuity provision is required even if employee/ company has not completed 5 years (vesting conditions as per Payment of Gratuity Act,1987- POGA) Yes, the gratuity provision is required […]

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Mar 4
Mar 4

Discount Rate For Actuarial Valuations (G. Sec.- 31st March 2017)

http://kacindia.com/download/658

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