Gratuity is a payment made by an employer to an employee as a token of appreciation for his/her long service within the same organisation for at least a period of 5 years. Significantly, any service duration of 6 months and above is considered to be a full year. Organisations with 10 or more workers need to pay gratuity under the Payment of Gratuity Act, 1972. Let us calculate the amount of gratuity for last-drawn salaries of Rs 28,000, Rs 43,000, and Rs 67,000 after serving for 7 years and 3 months.
Gratuity can be paid in the following scenarios:
1. Retirement: On retirement from service
2. Resignation: Upon completion of 5 years of continuous service
3. Death or Disability: On account of death or disability through accident or disease while in service
4. Superannuation: On attaining superannuation age (a kind of retirement benefit)
What decides the Gratuity amount?
Years of service and the basic salary drawn for the last time by an employee are taken to determine the gratuity amount.
Can a company exempt itself from the Payment of Gratuity Act?
If an organisation comes under the Payment of Gratuity Act of 1972, it cannot exclude itself.
What is formula to calculate gratuity?
(Last Drawn Salary x Number of Years of Service) X 15/26
Here, 15 refers to 15 days’ wages per year, and 26 refers to 30 days in a month, excluding Sundays.
What will be your gratuity on a Rs 28,000 basic salary for 7.3 years of service?
Let’s calculate gratuity for an employee with a basic salary of Rs 28,000, 7 years, and 3 months of service (rounded to 7 years).
Gratuity = (28,000 × 7 × 15) ÷ 26
Gratuity = Rs 1,13,076
What will be your gratuity on a Rs 43,000 basic salary for 7.3 years of service?
Let’s calculate gratuity for an employee with a basic salary of Rs 43,000, 7 years, and 3 months of service (rounded to 7 years).
Gratuity = (43,000 × 7 × 15) ÷ 26
Gratuity = Rs 1,73,653
What will be your gratuity on a Rs 67,000 basic salary for 7.3 years of service?
Let’s calculate gratuity for an employee with a basic salary of Rs 67,000, 7 years, and 3 months of service (rounded to 7 years).
Gratuity = (67,000 × 7 × 15) ÷ 26
Gratuity = Rs 2,70,576
Also Read: EPS Pension Calculation: Rs 68,000, basic salary, 16, 26, and 32 years of service, find out your monthly pension