A gratuity calculator is an helpful tool for estimating the amount you would receive upon leaving a job
Gratuity formula:
(15 x your last drawn salary x tenure of working) / 26
To use the calculator, input details such as the last drawn salary and the duration of continuous service with the company. The last drawn salary included the basic salary, dearness allowance, and any commission earned.
What are the eligibility criteria for receiving gratuity?
The Payment of Gratuity Act of 1972 is applicable to all establishments or organisations employing 10 or more employees. Employers who wish to provide gratuity benefits to their employees can choose to adopt the provisions of the Payment of Gratuity Act of 1972, and therefore, become liable to pay gratuity to eligible employees.
The following conditions must be met for the employee to earn a gratuity:
- The employee must be qualified for retirement benefits.
- The worker ought to have retired.
- The employee must have left their position after five years with the same company.
- The employee must have passed away or become disabled as a result of an illness or accident.
Gratuity Calculation – What is the formula for calculating the Gratuity?
The gratuity rules and calculations are prescribed by the Payment of Gratuity Act of 1972.
There are mainly two categories, as given below.
- Category 1: Employees covered under the Act
- Category 2: Employees not covered under the Act
Category 1: Employees covered under the Act
Using the two critical parameters – number of years of service and last salary drawn, you can calculate the gratuity as follows:
The Gratuity calculation formula that you can use to calculate the Gratuity amount is:
Gratuity = Last drawn salary x (15/26) x Number of years of service
Here:
- The number of working days per month is taken as 26 days.
- The gratuity calculation is accounted at the rate of 15 days wages.
The last drawn salary should be calculated to account for the following components:
- Basic
- Dearness Allowance – for government employees
- The commission received on sales
Example: If you had been drawing Rs. 80,000 as your last basic salary with 10 years four months of employment tenure, then the gratuity amount you will receive as per the formula is:
Gratuity = Rs. 80,000 x (15/26) x 10 = Rs. 4.62 lakh
The four months are below 5, so it is rounded off to 10. Months more than five are rounded off to the following year.
Category 2: Employees not covered under the Act
You can be paid a gratuity even if the organisation is not covered under the Act. If that is the case, the number of working days in a month changes to 30 days instead of 26 days.
Gratuity = Last drawn salary x (15/30) x Number of years of service
In the above example, if your organisation is not covered under the Act, then the calculation will be as follows:
Gratuity = Rs. 80,000 x (15/30) x 10 = Rs. 4.00 lakh
For employees covered under the Act, the benefit of a lower denomination is given. Hence, working days in a month are taken as 26 days instead of 30 days.
How can a gratuity calculator help you?
The gratuity calculator is useful in a number of situations, some of which are listed below:
- Decide how much you will get
The calculator provides you a rough indication of the gratuity you will get when you retire. It aids in calculating the pay you receive from the employer in exchange for your years of service. - Facilitates improved financial planning
By knowing the gratuity funds, you can build a strategy. With the appropriate investments, you can enjoy your retirement without worrying about money. You can carefully arrange your funds and make other investments once you are informed of the gratuity you will receive. - Saves time
You do not need to spend many hours determining the gratuity you will receive; you can get precise findings quickly. Enter the necessary information into the calculator to get precise results quickly.
FAQs
Gratuity = (15 × last drawn salary × working tenure)/30. For instance, if you have worked for a company for seven years, the organisation is not covered under the Gratuity Act. And your basic salary was Rs. 35,000. Gratuity Amount = (15 × 35,000 × 7) / 30 = 1,22,500.
How is gratuity calculated in UAE? ›
For employees who have worked for 1-3 years, their gratuity consists of 1/3rd of their basic salary of 21 days for each year of service. For employees who have worked for 3-5 years, their gratuity consists of 2/3rd of their basic salary of 21 days for each year of service.
How do you calculate gratuity in Zambia? ›
Steps to calculate gratuity in Zambia
- Enter your monthly salary agreed upon with the employer.
- Enter employement contract period. i.e 24 months represents two years worked.
- Choose gratuity rate not less than 25% of basic salary.
- View calculated gratuity.
Rate and Calculation of Gratuity
The gratuity rate, as per legal provisions, is “thirty (30) days' wages for every completed year of service or any period exceeding six months.” Any employment period exceeding six months is considered a full year.
How do you calculate basic salary? ›
1. What is the formula for calculating basic salary? Here's how the basic salary gets calculated from parameters like gross pay and allowances: Basic salary = Gross pay- total allowances (medical insurance, HRA, DA, conveyance, etc.)
What is gratuity in a restaurant? ›
"Gratuity" is defined in the Labor Code as a tip, gratuity, or money that has been paid or given to or left for an employee by a patron of a business over and above the actual amount due for services rendered or for goods, food, drink, articles sold or served to patrons.
How is gratuity calculated in UAE 2024? ›
If an employee has served more than three years or between three and five years, they are entitled to two third of 21 days basic salary as gratuity pay. Multiply daily wage by 21 or 30 (if the tenure is more than five years) = 333.30 x 21 = 6,999.30. Is gratuity calculated on basic salary in UAE?
How gratuity is calculated in the Middle East? ›
If an employee has served for more than one year but less than five years, he is entitled to full gratuity pay based on 21 days' salary for each year of work. If an employee has served more than five years, he is entitled to full gratuity of 30 days' salary for each year of work following the first five years.
How do you calculate end of service? ›
termination after more than 5 years of service, gratuity calculation to be done as 30 days' basic salary for each year of service after first 5 years and 21 days' basic salary for the first five years. Total gratuity should not exceed two-year basic salary.
How is gratuity calculated in Nigeria? ›
The formula to calculate the gratuity of an employee is as follows: Gratuity=Last drawn salaryx(15/26)xNumber of years of service In this case, 26 relates to the projected number of working days in a month, and the gratuity calculation is accounted at the rate of 15 days wages.
In the formula, the values are the following. For example, if individual A has worked with an organisation for 5 years, and your basic salary plus DA amounted to Rs. 30,000 every month, you are eligible to receive 5*30000*15/26 = Rs. 86,538.46 as gratuity. Your gratuity cannot exceed Rs. 10 Lakh in its entirety.
What are the rules for gratuity in India? ›
According to the Payment of Gratuity Act 1972, an employer may pay more gratuity to their employees, still the gratuity amount cannot exceed Rs. 20 lakhs. Any amount that is more than Rs. 20 Lakh is considered ex-gratia and is voluntarily given and is not enforced as per the law.
What is the percentage of gratuity? ›
Under The Payment of Gratuity Act, 1972, gratuity is calculated as 4.81% of the Basic Pay.
What is the percentage of gratuity in Pakistan? ›
In numerical terms, gratuity can be calculated by the following formula: Gross salary in last year of employment/26) x 30 x number of years of employment in the company. Of the three existing retirement benefit schemes, gratuity is the only benefit that is a statutory obligation on some employers.
What is the gratuity rule of Punjab government? ›
Calculation of gratuity amount: W x Y x 15 ÷ 26 [W = Last Wage drawn i.e. basic + DA; Y = number of completed years of continuous service (six months or less to be ignored and more than six months to be counted as full year)]. Maximum Limit : Rs. 3.5 lacs.
How do I calculate gratuity percentage in Excel? ›
you can write formula with your own. Gratuity Rule is = Last Basic/26Days X 15 Days X Number of working years.
What is the basic salary percentage in India? ›
What is basic salary percentage? Usually, the basic salary is 40% to 60% of CTC (Cost to Company). The statutory components: bonus, PF, gratuity and other benefits are determined based on the basic salary. An increase or decrease in the basic salary calculations can affect the employee's CTC.
How is DCRG calculated in Kerala? ›
The amount of DCRG is equal to half of the emoluments last drawn by the officer * No of years of Q.S. (maximum 16 ½ times emoluments last drawn or Rs. 14,00,000 whichever is less) w.e.f. 1-07-2014. Note:- Emoluments = Pay + DA.
