The amount of gratuity the employee will get is decided by a formula. Although the company can give more than the fixed amount if it wants, but according to the rules it should not exceed 20 lakhs. Know the rules related to gratuity.
If you have been working in a company for 5 years, then you are considered entitled to get Gratuity. Gratuity is given by the company as a reward for providing safe services to its employee for a long time. The amount of gratuity the employee will get is decided by a formula. Although the company can give more than the fixed amount if it wants, but according to the rules it should not exceed 20 lakhs. The amount of gratuity is given to the employee after 5 years or after leaving the job or after retirement. If you are also employed, then you must know some things related to gratuity.
7 rules related to gratuity
- There is a formula to fix the amount of gratuity. This formula is – (last salary) x (number of years worked in the company) x (15/26). Last salary means the average of your last 10 months salary. Basic salary, dearness allowance and commission are included in this salary. Due to 4 days of Sunday in a month, 26 days are counted and gratuity is calculated on the basis of 15 days.
- If 10 or more people work in a private or government company, then that company should give the benefit of gratuity to all the employees. Apart from the company, shops, mines and factories come under this rule. But any employee becomes entitled to gratuity only after working in that company for 5 consecutive years.
- If an employee has worked in the company for 4 years and 8 months, then his job will be considered for full 5 years and he will get the amount of gratuity according to 5 years. If he has worked for less than 4 years and 8 months, then the period of his service will be counted as 4 years and in this case he will not get gratuity. That is, even after working for 4 years and 8 months, you are entitled to gratuity.
- The notice period of the employee is also counted in the period of gratuity. Suppose you resign from a company after working for four and a half years, but after resigning you have served a notice period of two months. In this case, the duration of your job will be counted as 4 years and 8 months only. And considering it as 5 years, the amount of gratuity will be given.
- When the company or organization is not registered under the Gratuity Act, the employees are not covered under the Gratuity Act. In this case, it is the discretion of the company whether to give gratuity or not. But if the company still wants to give gratuity to an employee, then its formula is different. In this case, the amount of Gratuity will be equal to half a month’s salary for every year. But the number of working days in a month will be considered as 30 days, not 26.
- Any company can give maximum 20 lakh rupees as gratuity to its employee. The amount received as gratuity is tax free. This rule applies to both government jobs and private jobs.
- If an employee dies during the job, then the entire amount deposited in his gratuity account is given to his nominee. In such a case the condition of minimum 5 years of service is not applicable.
We have taken all measures to ensure that the information provided in this article and on our social media platform is credible, verified and sourced from other Big media Houses. For any feedback or complaint, reach out to us at businessleaguein@gmail.com
