Question

In: Finance

Mr. Hilal joined bank Muscat in the IT department on the 20th of March 2002. As...

Mr. Hilal joined bank Muscat in the IT department on the 20th of March 2002. As per the agreement with the employer, he is promised a starting basic pay of OMR 650 per month along with other allowances. His gross starting salary adding all allowances amounts to OMR 750. As per the terms and conditions in the contract, he is entitled for an increment (increment added to basic salary) after the completion of one year service. He retired from service on 15th March 2020 when he was drawing a gross salary of OMR 1850 including all allowances OMR 350.

1)You are required to calculate the gratuity payable to Mr. Hilal.  

Solutions

Expert Solution

Article 39 of the Oman Labor Law states that,"all employees are entitled to a Post Service Gratuity payment. Omani employees should all be registered under the Social Insurance Scheme with PASI (Public Authority for Social Insurance)I, Employers don’t need to make provisions for those payments. However, Employers need to make provisions for their expat staff and their end of service gratuity to be paid upon their termination/resignation."

The calculation of the same is as follows:

1) For the first three years:

BASIC WAGE x 0.5 x NUMBER OF YEARS WORKED

2) For 3+ Years:

BASIC WAGE x 1 x NUMBER OF YEARS WORKED

where  basic wage used for the calculation shall be the basic wage the employee last received.

In the given question Hilal works for more than 3 years ( 20 march 2002 -15 march 2020 nearly 18 years)

Years of service = 18 years

Last drawn salary = OMR 1850 (including OMR 350 allowances)

therefore , last drawn salary = OMR1500

gratuity amount =BASIC WAGE x 1 x NUMBER OF YEARS WORKED

= 1500*1*18

=OMR 27000


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