Gratuity: Gratuity is the amount you get when you leave a company, as a token of appreciation for the services rendered by the employee.
Gratuity is the amount you get when you leave a company. As a token of appreciation for the services provided by the employee. But, the employees have to fulfill certain conditions before paying this money. For example: According to the rules, any company with more than 10 employees is liable to pay Gratuity to an employee with more than 5 years of experience. Here is all the information about you about the gratuity laws in the country.
Qualification for gratuity?
At the time of leaving, the company pays gratuity to an employee to remain in uninterrupted service for 5 years and more. An employee must work at least 190 days in a firm that works less than 6 days a week. The Payment of Gratuity Act 1972 states that the maximum amount of gratuity to be paid cannot exceed Rs 20 lakh. Apprenticeships and internships do not entitle you to gratuity. Gratuity is calculated on the basis of the number of years of service, as it does not include absentee duty and unaccounted leave. If there was a break in your services then that particular time is also deducted from the payment of gratuity.
How to calculate your gratuity?
Gratuity is calculated differently for monthly, piece rated and seasonal employees.
For employees falling under the Payment of Gratuity Act, gratuity is calculated on the basis of 15 days of the last drawn salary for each completed year of service. If an employee serves more than 6 months in a year, then the entire year is counted towards gratuity. In this case, the purpose of calculation allowance other than Basic + Dearness Allowance (D.A) is not considered.
Formula: Gratuity for monthly employees = (Basic + DA x15 / 26) x Years of service rendered.
piece rated Employee gratuity is calculated taking into account the average of the last 3 months of service before retirement or termination. For seasonal employees, instead of 15 days, only 7 days are taken into account for calculating gratuity and in turn multiplied by the number of seasons worked over the years. The remaining calculation is the same as the monthly working employee. Formula: Gratuity for monthly employees = (Basic + DA x7 / 26) x Number of seasons.
