Gratuity Amount Calculation

Employees, as defined here, are the ones hired on company payrolls. Trainees are not eligible and gratuity is paid on the basis of the employee’s basic plus dearness allowance if any.

How much can you get?

You become entitled to a gratuity on resignation or on retirement after five years or more of service. As per the Act, the gratuity amount is 15 days’ wages multiplied by the number of years put in by you. Here wage means your basic plus dearness allowance. Take the monthly salary drawn by you last (basic plus dearness allowance) on resignation or retirement and divide it by 26, assuming there are four Sundays in a month. This is your daily salary. Multiply this amount by 15 days and further with the number of years you have put into service.

For instance, if your average monthly salary is Rs 50,000, the gratuity payable to you after 10 years of service would be Rs 290,000. However your employer factors in another term: ‘uninterrupted service’. The term covers the service period of the employee including leaves or breaks, except periods notified as breaks in service by the employer.

For employees who do not fall under the Gratuity Act, the amount due for them is half of the average ten months’ salary multiplied by the number of years of service.

How to calculate Gratuity ?

Gratuity = (Last drawn salary + Dearness Allowance / 26) x 15 x Number of years of service

Source : Rediff & igecorner.com