Any employee of a private company that provides EPF facilities is eligible to receive an amount as gratuity after completing 5 years of service. However, an employee is also eligible to get the gratuity before five years if he/she gets injured and disabled in an accident or due to a disease. G All gratuity payments are controlled by the laws laid down under the Payment of Gratuity Act 1972. The amount depends on the last drawn salary and the years of service served to the company.
What is Gratuity?
Gratuity refers to the amount that an employer pays his employee, in return for services offered by him to the company. However, only those employees who have been employed by the company for five years or more are given the gratuity amount. It is governed by the Payment of Gratuity Act, 1972.
The employee can get the gratuity before five years if he/she gets disabled in an accident or due to a disease. Gratuity mainly depends on your last drawn salary and the years of service which are rendered to the Company.
Gratuity Calculation Formula
G = n*b*15/26
In the formula, the values are the following.
| N/n | The number of years you have worked in the concerned organisation |
| B/b | Last drawn basic salary plus Dearness Allowance (DA) |
| G | Gratuity amount you are eligible for |
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.
Note that under the existing laws –
- Your gratuity cannot exceed Rs. 10 Lakh in its entirety. Any amount beyond this upper limit is called ex gratia payment.
- Also, if you have worked for, say 17 years and 6 months, the figure will be rounded off to the nearest single digit or 18 years.
What are the Eligibility Criteria for Payment of Gratuity?
- You should be eligible for superannuation.
- You should have retired from service.
- You should have resigned after continuous employment of five years with the company.
- In case of your death the gratuity is paid to the nominee, or to you on disablement on account of a sickness or an accident.
How can a Gratuity Calculator Help You?
Under the Payment of Gratuity Act of 1972, you are eligible to receive the gratuity amount provided –
- You are near the age of superannuation.
- You have completed 5 years of work in the same organisation continuously.
- You do not have any other full-time employer.
In such cases, a gratuity calculator online in India is useful because –
- It helps you ascertain the precise amount due to you.
- It saves you valuable time and other resources.
- You can use it from the comfort of your home.
- It helps you in long-term financial planning.
FAQs
I have worked for 16 years and 4 months. How many years’ worth of Gratuity will I receive?
The laws are framed to round off the total employment period to the nearest full year. In your case, gratuity will be calculated for 16 years. It would be 17 years if you had worked for 2 more months.
Can I also calculate ex gratia payment using this calculator?
Yes. Anything above Rs 10 Lakh is automatically calculated as your ex gratia payment.