Gratuity Calculator

What is Gratuity?

Gratuity is a payment made by an employer to an employee in appreciation of their services to the company. This benefit is typically available to employees who have completed five years or more of service. The provision for gratuity is governed by the Payment of Gratuity Act, 1972.

Employees may be eligible to receive gratuity before reaching the five-year mark if they become disabled due to an accident or illness. The gratuity amount largely depends on the employee's last drawn salary and the total years of service with the company.

Eligibility Criteria for Payment of Gratuity

To qualify for gratuity, you must fulfill the following eligibility requirements:

• You must be eligible for retirement.
• You should have officially retired from your position.
• You must have completed at least five years of continuous employment with the company.

In the event of your death, the gratuity will be paid to your nominee. Additionally, if you experience disablement due to an illness or accident, you may also qualify for gratuity before completing five years of service.

What is a Gratuity Calculator?

A Gratuity Calculator is a tool that helps you estimate the gratuity amount you would receive upon leaving your job after at least five years of continuous service.

To use the calculator, you need to input your last drawn salary, which should include your basic salary, dearness allowance, and any sales commissions. The calculator quickly computes and displays the gratuity amount, making it user-friendly and efficient for repeated use.

Gratuity Calculation – Formula for Determining Gratuity

For employees whose employers fall under the Gratuity Act, the gratuity amount can be calculated using the following formula:

Where:
( n ) = Tenure of service completed in the company
( b ) = Last drawn basic salary plus dearness allowance

Example: If you have worked with XYZ Company for 15 years and your last drawn salary, including dearness allowance, was ₹ 30,000, the calculation would be:
15 * 30,000 * 15 / 26 = ₹ 2,59,615

Important Notes

• According to the Gratuity Act, the total gratuity amount cannot exceed ₹ 20 lakh; any amount beyond this will be considered ex-gratia.
• If you worked more than six months in the last year, your service tenure will be rounded up. For instance, if your tenure is 16 years and 7 months, your gratuity will be calculated for 17 years.
• For employees whose employers are not covered by the Gratuity Act, the gratuity is computed based on half a month’s salary for each completed year of service. The formula is: (15 * Last Drawn Salary * Tenure) / 30.