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Gratuity Calculated: How is the amount of gratuity calculated?

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If you work for a long time in a company, then you are entitled to gratuity. Most of the people when they change jobs, they expect gratuity from the company. Here, it is important to know that certain rules have been set for getting gratuity. If you fulfill it, then only you will get the benefit of gratuity. Let’s know the Gratuity Act, Gratuity Calculation and other details …




What is gratuity

In addition to the Provident Fund (PF), the employees working for a long time in a company also get gratuity. Actually, gratuity is a reward given to an employee by the company. If the employee fulfills certain conditions of the job, then he will get the amount of gratuity according to a fixed formula.

When will you be entitled to gratuity?

A small part of the gratuity is deducted from the salary of the employee, but a large part is given by the company. According to the existing rules, if a person works in a company for at least 5 years, then he becomes entitled to gratuity. That is, if you leave the company after 5 years, you will get gratuity.

What does the Payment of Gratuity Act, 1972 say?

According to the Payment of Gratuity Act, 1972, this benefit is available to every employee of a company where at least 10 employees work daily in a year. If the employee changes job, retires or leaves the job due to any reason but he fulfills the rules of gratuity then he gets the benefit of gratuity. At the same time, if a company or institution does not come under the purview of the Gratuity Act, but if it wants, then it can give the benefit of gratuity to its employees.

How is the amount calculated

There is a fixed formula to calculate gratuity. Total Gratuity Amount = (Last Salary) x (15/26) x (How many years worked in the company). Now suppose an employee worked in the same company for 20 years. If the final salary of that employee is Rs 75000 (inclusive of basic salary and dearness allowance), then he will get about Rs 8.65 lakh as gratuity ((75000) x (15/26) x (20) = Rs 865385). In the formula of gratuity calculation, only 26 days are counted in every month, because it is believed that 4 days are holidays. At the same time, gratuity is calculated on the basis of 15 days in a year.




Gratuity: Also Know

According to the formula of gratuity, if an employee works for more than six months, then it will be calculated as one year. For example, if an employee works for 7 years 8 months, then he will be considered as 8 years and on this basis the amount of gratuity will be made. At the same time, if 7 years works for 3 months, then it will be considered as 7 years only.

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