Gratuity Calculation: To get gratuity, it is necessary for the employee to work continuously for at least 5 years in that company. This rule is applicable under the Gratuity Act 1972.
Gratuity Calculation: If you work in a company for many years, then the company can give you gratuity. But not everyone gets gratuity, for this the government has made some rules. If you fulfill these conditions, only then you will get its benefit. Let us know the rules of gratuity, its calculation and important things related to it.
What is gratuity?
If you work for a long time in a company, then apart from salary, pension and PF, you also get gratuity. This is a kind of reward given by the company, which is given to the employee under the prescribed rules. If an employee fulfills the necessary conditions of the job, then the amount of gratuity is given to him on the basis of a certain formula. To get gratuity, it is necessary for the employee to work continuously in that company for at least 5 years. This rule applies under the Gratuity Act 1972.
Eligibility for gratuity?
A small part of the gratuity amount can be deducted from the employee’s salary, while the major part is paid by the company. According to the current rules, if an employee works in a company for at least 5 years, he becomes entitled to receive gratuity. That is, if you leave the job after completing 5 years, you will be paid gratuity.
What does the Payment of Gratuity Act, 1972 say?
Under the Payment of Gratuity Act, 1972, the benefit of gratuity is given in companies where at least 10 or more employees work. If an employee changes jobs, retires or leaves the job for any reason and fulfills the rules of gratuity, then he gets the benefit of it.
Even if a company does not come under this Act, it can still decide to give gratuity to its employees. That is, it depends on the company’s will whether it wants to give this benefit to the employees or not.
How is gratuity calculated?
Gratuity is calculated according to a fixed formula:
Gratuity = (Last salary) × (15/26) × (Number of years worked in the company)
For example, if an employee worked in the same company for 10 years and his last salary (basic + DA) is Rs 60,000, his gratuity will be calculated as: (60,000) × (15/26) × (10) = ₹3,46,154
In this calculation, only 26 days are considered in every month, because there are approximately 4 days of leave. Also, gratuity is calculated on the basis of 15 days in a year.
It is also important to know this
If you are working somewhere, then it is important to understand the rule of calculating gratuity. According to the rule, if an employee has worked for more than 6 months in a company, then his service period will be considered as a full year.
For example:
- If someone has worked for 7 years and 8 months, then it will be counted as 8 years.
- But if someone has worked for only 7 years and 3 months, then it will be considered as 7 years only.
- The amount of gratuity is decided on this basis.
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