Gratuity Calculation

How to calculate Gratuity?

Gratuity कैसे calculate करें?

Gratuity क्या है ?

GRATUITY is an amount of money which is paid to the employee by his employer at the time of Retirement/Death/Resign for services rendered in the company. This benefit is payable under the Gratuity Act 1972. However, Gratuity is paid only to those employees who have completed 5 years of service or more with their company.

Gratuity Payment Act 1972.

Gratuity payment Act 1972 is applicable for all kinds of Government Jobs in all States of India except Jammu and Kashmir. This Gratuity Act covers employees who have engaged in Factories, Plantations, Companies, Mines, railways, Oil fields, Ports and other such establishments to have more than 10 (Ten) employees. The lump sum amount of Gratuity is totally paid by the employer without any contribution from the employee.

Eligibility Criteria for Gratuity Benefit:

You may eligible for payment of Gratuity when you should need the following eligibility criteria:

1. You should have retired from your Job.
2. You should be eligible for Superannuation.
3. You should have resigned after 5 years of service.
4. An employee suffers disability due to accident/sickness.
5. An employee passes away.

How to Calculate Gratuity Amount?

The formula for Gratuity Calculation is as follows:

(Last Basic + Dearness Allowance) x Year of service x 15/26

Example:-

Suppose Mr Pankaj Kuma Singh an employee of XXXXX Pvt. Ltd. has worked with his company for 30 years and last drawn his Basic + DA is 50,000.00 then, the Gratuity will be calculated as:

Gratuity Amount = 50,000 x 30 x 15/26 = ₹ 8,65,384.61

Attention Please-

1. As per the latest update, the amount of Gratuity cannot be more than ₹ 20 lakh. Any excess amount should be treated as ex-gratia.
2. Moreover, if the numbers of months in the last year of service are more than 6 months is rounded off to the next number of year. While anything below 6 months in the last year of service is rounded off to the previous lower number of years. Suppose an employee service period is 29 years 7 months, then it will be rounded to the next number of years means 30 years of service. but the same service period is 29 years and 5 months, then it will be calculated as 29 years.

Gratuity calculation- In case of the death of an employee:

In case of the death of an employee, the Gratuity amount is paid on the basis of a year of service which is furnished bellows:

Qualifying Service	Rates
Less than 1 (one) year	2 x Basic Pay
1 year or more but less than 5 years	6 x Basic Pay
5 years or more but less than 11 years	12 x Basic Pay
11 years or more but less than 20 years	20 x Basic Pay
20 years or more	Half of the salary for every completed 6-month period subject to maximum 33 times of emoluments

The maximum amount is restricted to Rs 20 lakh.

For employee, who has not covered under the Gratuity Act.

The amount of Gratuity payable to the employee should be calculated based on half a month’s salary for each completed year. Here, Salary means Basic, Dearness Allowance and commission based on sales.

The formula is as follows:

Last drawn Salary x year of service x 15 / 30

Example:

In the above mentioned example, if XXXX Pvt. Ltd. Has not covered under the Act, then Mr Pankaj Kumar’s Gratuity amount will be calculated as:

50,000 x 30 x 15 / 30 = Rs.7,50,000.00

Last words:

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