Confused About Gratuity Calculation? Let's Clarify the Formula and Logic Together

Hi All,

I am Sonali. I just went through many sites to search for the exact formula for the calculation of Gratuity, but still confused. Some are giving it like [(Basic+DA)/26]*15*number of years worked, while others are presenting it as {[(Basic+DA)*15]/26} * number of years worked.

Which one is correct, and I also want to know the logic for this formula as well as whether the Basic + DA is calculated yearly or monthly.

Hi,

I think the second one is correct, and if you have any doubt, refer to the labor act.

Regards,
Dhruvin

Hello Sonali,

The first formula is correct. Gratuity is calculated/paid for 15 days for every year of service completed. So, first, you need to divide the salary (basic & da) by the total days of the month, which gives you the rate per day. Then, multiply it by 15 and the number of years completed.

I hope this explanation is clear to you.

Regards,
Srinath

Hi Sonali,

The formula is last drawn salary (basic + DA) / 26 * 15 * year of service. For any encashment, e.g., bonus calculation, leave encashment, deduction of EPF, gratuity payment, etc., the component of basic salary + dearness allowance is considered rather than gross salary. 26 represents the working days instead of 30 or 31 days, and 15 is the figure for 15 days' salary of each year. If the year of service is 5 years or more, then eligibility for payment of the same will be possible. I think most of your doubts will be cleared now.

Thanks & regards,

Sumit Kumar Saxena
+91-9899669071, 0120-4131277

The formula is basic, added divided by 26, multiplied by 15, multiplied by the number of years completed. If someone crosses 6 months, then it would be calculated for the next year. The Madras High Court has given a verdict that gratuity shall be calculated in 4 years 8 months.

Thank you.

Dear,

Both formulas are correct, and upon application, you will get the same result.

Regards,
Sesar

Dear Sonali,

The interpretation of Sumitkumar Saxena is perfect and as per the provisions of the Payment of Gratuity Act. Please follow the same.

Kiran Kale,
Kolhapur.

Dear all,

Basic and DA have to be taken as salary for gratuity calculation. If you take the gross salary, it is more than the statutorily prescribed rate, which will be set as precedent. The salary, i.e., basic + DA, has to be divided by 26 to arrive at one day's salary, which then has to be multiplied by 15 and the number of years of service rendered. For example, 5 years and 6 months should be considered as 6 years.

If any further clarification is required, please email me.

C. Manimaran
Email: mani_c74@yahoo.co.in

Dear Sonali,

I had the same doubt in my mind a few days back, and like you, I went through many sites and got confused. However, after a discussion with a senior and experienced (more than 20 years) HR professional, he said that the following formula is correct and simple to calculate:

[-left(frac{{Basic+da}}{26}right] times 15 times text{number of years worked}]

I tried it on a trial basis, and it is really good and simple. Now, I am using it on a regular basis. It is useful.

Regards,
Prashant

Thanks Sonali,
I want also to know that formula. My employee is resigned which is worked in my organization for 5.4 years.
I think First formula is right.
Regads,
Sachin Kashid
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Impossible doesn't mean It is not possible,
It actually means No one can done it so far.

Go by the mathematics calculation rule of solving first in the order of "BODMAS":

B = Brackets
O = Of
D = Division
M = Multiplication
A = Addition
S = Subtraction

Both formulas work. Both are the same according to mathematical calculations.

Anyway, the steps to calculate gratuity are as follows: first, (Basic + DA) should be divided by 26 to get (Basic + DA) per day. Then, the 15 days of gratuity for the number of years worked should be calculated.

Regards,
Santosh

Mathematically, both formulas are the same. Before stating "the first one is correct," "the second one is correct," etc., please seek advice from a mathematical expert.

Abbas.P.S