Amit Aishwary Choudhary
Managing People At Work.
+1 Other

Thread Started by #Avishek Jana

Please inform me regarding the procedure of Gratuity calculation. How will calculate gratuity on basis of working days. What is the minimum eligibility working of an employee in a year. please help us in this regards as soon as possible.
30th December 2016 From India, Kolkata
$$$Formula for calculating Gratuity:

Gratuity is payable @ 15 days wages for every completed year. If in last year, the service is more than 6 months, it will be counted as full year for purpose of gratuity. It is applicable only after of 5th year onward. The general formula = 15/26*No. of service year*Last Wages drawn In case of seasonal establishment, Gratuity is Payable @ 7 days wages for each season.

$$$ Maximum Gratuity Ceiling:

The maximum limit raised (w.e.f-24th May 2010) from “3.5 laces to 10 lac”.

$$$ Compulsory Insurance for Gratuity Liability:

Every Employer has to obtain an insurance in the manner prescribed, for his Liability for payment towards the Gratuity under this Act, from the Life Insurance Corporation of India established under the LIC of India Act or any other prescribed Insurer.

$$$ Nomination under the Act:

Each Employee who has completed one year of service is required to make a nomination for the purposes of gratuity in case of his death. There can be more than one nominee in – “Form F”. Nominees may be changed at any time by the employee, by giving a written notice to the employer.

$$$ Forfeiture of Gratuity:

Gratuity can be forfeited where an employee has been terminated:

(a) for any act, willful omission or negligence causing any damage or loss to or destruction of any property belonging to the employer,

(b) for riotous or disorderly conduct or any act of violence on his part,

(c) for any act which constitutes an offence involving moral turpitude, provided the offence has been committed by him in the course of his employment. However, the employer must terminate the services of the employee because of this damage.

The forfeiture can be done on three category misconduct @ (i) NIL, (ii) to the extent of loss or damage and (iii) the whole amount of gratuity.
30th December 2016 From India, Delhi
$$$ The Period of Service For the Gratuity Payment:

Your gratuity increases with the increase of the service period. But to get the gratuity you must complete 5 years in the service (more than 4 years 6 months).

For the gratuity calculation, the years of service are rounded off to the nearest integer. It means if you have completed the 7 years 7 months in the service, the length of service for gratuity calculation would be 8 years. Similarly, if you have completed the 9 years and 5 months, the period for gratuity calculation would be 9 years.

$$$ According to the law for gratuity calculation your salary will include only the following component:

Basic Salary

Dearness Allowance (if any)

It means HRA, bonus, special allowance and reimbursements are not taken for the gratuity calculation. Now you know, why the private sector employers try to keep basic salary low.

$$$ Formula Of Gratuity Calculation:

According to the gratuity rules, you must get the salary of 15 days for every completed years as gratuity. It means if you have completed 5 years in the service you must get the gratuity of one day salary *15*5. It seems very simple.

But what do you think what is the salary of a day. Will it be a monthly salary divided by 31 or a monthly salary divided by 30? No. It would be a monthly salary divided by 26. Why? It is because, according to labor law, every employee is entitled for weekly offs. Therefore, the average working days in a month is not more than 26 days. You get the monthly salary for the work of 26 days. Hence, your one day salary would be a monthly salary divided by 26.

Gratuity = Number of years * Last drawn salary of 15 days

= Number of years * 15/26*monthly salary

Example of Gratuity Calculation

A Person works in a food processing company as marketing manager. He gets the basic salary of Rs 26000, dearness allowance of Rs 8000, special allowance of 21,000 and reimbursements of 45,000. After 6 years 8 months of service he resigns from the job. What would be his gratuity.

The last drawn salary of Person

= Basic salary +DA

= 26,000+8000

= 34,000

Years of Service

= 6 years 8 months

= 7 years


= Salary * years*15/26

= 34,000*7*15/26

= 1,37,308

It is sufficient to understand the all about Gratuity
30th December 2016 From India, Delhi
Your query is without required details. Please do not pose hypothetical question. Do you work 5 days a week or 6 days a week.
In case of former, you require to work for 190 days in a year in case of latter for 240 days. You should have worked for 5 years based on above calculation to be eligible to receive gratuity.
4th January 2017 From India, Mumbai
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