Overview
"Gratuity" represents compensation provided to an employee upon retirement or employment termination. The Bangladesh Labour Act, 2006 establishes the framework for calculating gratuity payments.
Gratuity calculation standards
According to the 2006 Act, gratuity comprises the salaries of at least thirty days, at the rate an employee last received, for each completed year of service or for a duration of service exceeding six months — or, in the case of service of more than ten years, the salaries of forty-five days. This payment is provided in addition to any other compensation, wages or notice-related allowances.
Circumstances for gratuity payment
Employers may pay gratuity in several situations:
- Employee death: when an employee with over two years of continuous service dies while employed.
- Retrenchment: when an employee with a minimum of one year of continuous service is retrenched due to redundancy.
- Incapacity: when an employee is discharged due to physical or mental incapacity after completing at least one year of service.
- Termination of permanent employees: when permanent employment ends (excluding dismissal).
- Voluntary resignation: when permanent employees resign from service.
Legal considerations
An important distinction exists: the Labour Act does not explicitly mandate that employers pay gratuity. Instead, employers may choose alternative compensation forms. The Act requires gratuity payment only when it exceeds other applicable compensation amounts.
Why fund audits matter
Fund auditing examines financial records to verify accuracy and regulatory compliance with accepted accounting standards. Audits help organisations achieve their objectives, prevent fraud, and maintain business consistency and value.