Gratuity Calculation: Can Someone Explain the Formula to Me?

Can anyone tell me the formula for Gratuity?

Hi, sailu

Applicable

Every factory (as defined in the Factories Act), mine, oilfield, plantation, port, and railway.

Every shop or establishment to which the Shops & Establishment Act of a State applies in which 10 or more persons are employed at any time during the year-end.

Any establishment employing 10 or more persons as may be notified by the Central Government.

Once the Act applies, it continues to apply even if employment strength falls below 10.

Eligibility

Any person employed on wages/salary. At the time of retirement, resignation, or on superannuation, an employee should have rendered continuous service of not less than five years. In the case of death or disablement, the gratuity is payable, even if he has not completed 5 years of service.

Benefits

The quantum of gratuity is to be computed at the rate of 15 days' wages (7 days' wages in the case of seasonal establishments) based on the rate of wages last drawn by the employee concerned for every completed year of service or a part thereof exceeding 6 months. The total amount of gratuity payable shall not exceed the prescribed limit. In cases where a higher benefit of gratuity is available under any gratuity scheme of the company, the employee will be entitled to the higher benefit.

Calculation of Gratuity:

1. Gratuity = Monthly Salary x 15 days x No. of yrs. of service.

2. Max. Gratuity payable under the Act is Rs. 3,50,000/- (w.e.f. 24-9-1997)

Penal Provisions

Nonpayment of gratuity payable under the Act is punishable with imprisonment up to 2 years (minimum 6 months) and/or a fine up to Rs 20,000/-. Other contraventions/offenses attract imprisonment up to 1 year and/or a fine up to Rs 10,000.

Regards, shaktiraj

Hi Sailu,

Please find attached the file for gratuity calculation.

Warmest Regards,
Mohan M. S.

Dear All,

I would like to clarify the calculation of Gratuity.

Gratuity = BASIC SALARY / 26 * 15 * NO OF COMPLETED YEARS OF SERVICE.

DABAS

Gratuity calculation formula:
Gratuity = Basic Salary / 26 x 15 days x Number of service years.
The maximum gratuity payable is Rs. 3,50,000/-.

Hi MohanMS,

I appreciate your efforts in preparing the Gratuity PPT. In slide No. 06, there should be a slight change in point No. 02. When an employee is in their 5th year and completes 240 days, the employee is not entitled to gratuity. Once the employee completes 5 years and 240 days, they are entitled to 6 years of gratuity.

Regards,
Nimish Joshi
9969526325

Dear friend,

I have come across a typical issue - one of my employees left the services three days short of completing five years (18.11.03 to 15.11.08). Is he eligible for gratuity? Please advise.

Gratuity Calculation is simple

(Basic Salary + DA )/26 x 15 x No. of Years in service.

• DA is optional, if applicable
• 26 = No. of work days in a month
• 15 = 15 days
• No. of years in Service, usually its 5 years but also depends upon co. policy.

Point to Note:

• Gratuity is Applicable after completion of five (5) years in service.
• If any employee :

Completes 5 ½ service or less than 6 years, will receive Gratuity for 6 years,
if Service less than 5 ½ and service completed for 5 years than Gratuity will be applicable for 5 years.
Less than 5 years – Gratuity not applicable.
Anuz

Dear All,

I would like to clarify the calculation of Gratuity. It is Gratuity = BASIC SALARY / 26 * 15 * NO OF COMPLETED YEARS OF SERVICES.

Dabas

Dear Dabas,

The formula should be clear enough. It's like Gratuity = (Last drawn (Basic + DA (If Applicable)) * No. Of Years of continuous service * 15) / 26.

Regards, Mallik