Gratuity Calculation: Under the provisions of the Gratuity Payment Act of 1972, employees who have completed five years of continuous service with a company are eligible to receive a gratuity payment from that organization. This Act applies specifically to companies that employ ten or more individuals. Gratuity serves as a financial reward for employees in recognition of their long-term service and is typically disbursed upon resignation or retirement.
How to calculate gratuity
If you have been employed continuously for five, seven, or ten years, you may be wondering how much gratuity you are entitled to receive. The gratuity amount can be calculated using the following formula: (Last salary) x (number of years of service) x (15/26). The “last salary” refers to the average of your last ten months’ earnings, which includes your basic salary, dearness allowance, and any commissions. The calculation is based on 26 working days per month, accounting for four days off, typically Sundays, and the gratuity is computed on the basis of 15 days.
Now you can calculate at your own
For instance, if you worked for a company for five years and your final salary was Rs 35,000, the gratuity amount would be calculated as follows: (35,000) x (5) x (15/26) = Rs 1,00,961. With the help of this formula you can calculate your gratuity amount by adding the salary amount, years of your service.
In cases where a company or institution is not registered under the Gratuity Act, its employees are not covered by this legislation. However, the company may still choose to provide gratuity to its employees, albeit under a different calculation method. In such instances, the gratuity amount would be equivalent to half a month’s salary for each year of service.