How Do I Calculate My Gratuity After 5 Years with My Salary Changes?

Dear All, I have been working at the company since 18/08/2006. Therefore, on 18/08/2011, my 5 years will be completed. Could you please provide me with the calculations for the gratuity amount I will receive?

My Salary Progression

- Salary = 12,000, Basic 6000 Rs. 2006 to 2007
- Salary = 13,500, Basic 6750 Rs. 2007 to 2009
- Salary = 15,500, Basic 7750 Rs. 2009 to 2010
- Salary = 17,000, Basic 8500 Rs. 2010 to present now.

Thank you.

Below is the formula for calculating gratuity:

Gratuity Calculation Formula

Gratuity Amount = Basic of employee * 4.81% * number of years

For more information, Google or click the link below.

Regards,
Saravanan

Last Month Base Salary

Few more information:

Gratuity is a payment made for the past services of the employee by the employer when the employee retires or resigns from the organization. This payment is also made to the employee's legal heir in the event of death. It is payable for 15 days per year for the period the employee has worked in the organization. An employee does not contribute any portion of his salary towards this amount.

Gratuity is payable to any employee only after the completion of 5 years of continuous service in the organization.

Gratuity Calculation Formula

This formula will help you estimate how much gratuity you will get when you retire.

Covered Under the Payment of Gratuity Act, 1971

(Last drawn monthly basic salary + dearness allowance) / 26 x 15 days x number of years of service (date of joining – date of retirement/leaving job)

Note: After the completion of 5 years, if an employee works more than 6 months, it is treated as one year.

Example: If the last drawn monthly basic salary is $10,000 and the number of years served in the company is 20, then 10000 / 26 x 15 x 20 = $115,384.60

Not Covered Under the Payment of Gratuity Act, 1971

((Last drawn monthly basic salary + dearness allowance + commission) * 15 * No. of years of service) / 30

Here, only completed years will be considered in the calculation. If an employee has a total service of 10 years, 8 months, and 15 days, only 10 years will be considered in the calculation.

Gratuity Amount = Basic of employee * 4.81% * number of years * 10000 / 26 x 15 x 20 = 115384.60

What are 26, 15, 20? Please let me know. Please clarify the confusion above.

Regards,

It's already explained above.

Gratuity Calculation Formula

(Last drawn monthly basic salary + dearness allowance) / 26 x 15 days x number of years of service (date of joining – date of retirement/leaving job)

- 26 = Number of working days in a month
- 15 = Number of days' salary to be paid
- 20 = Number of years of service with the organization

Thank you.

The gratuity calculation formula is as follows:
Basic + DA / 26 X 15 X (Number of total experience years)
For example, Your Gratuity = 8500 / 26 X 15 X 5
= 24,519

Regards,
Vijay Kumar Shetty
[Phone Number Removed For Privacy Reasons]

Understanding Gratuity Calculation

Under the Gratuity Act, if an employee completes 6 months or more in a year, it is considered to be one complete year. In the above case, it will be considered as 11 completed years.

Regards,
C B Sehgal

Hi, I am Harshal Joshi. I am working as an Executive HR in a manufacturing company in Pune. I have one query about gratuity. If my basic salary is 22,000 and my total years of service are 10 years, then how do I calculate the gratuity?

Regards,
Harshal

Gratuity Calculation as per the Gratuity Act

The calculation is given below:

[(Last year Basic x 15 / 26) x Number of completed years of service], i.e., [(8500 x 15 / 26) x 5] Rs. 24,519/- (Twenty-Four Thousand Five Hundred Nineteen Only)

Raju, [Phone Number Removed For Privacy Reasons]

Gratuity Formula

Gratuity Formula: Last wage drawn X No. of Completed Years of Continuous Service X 15/26

= 8500 X 5 X 15/26 = 24519 (Approx)

Gratuity Calculation

Gratuity calculation can be done using the formula: gratuity = current basic x 15 x complete years of service / 26. For example, if we consider the case of someone with a current basic salary of 8500 working for 5 complete years, the calculation would be as follows:

gratuity = 8500 x 15 x 5 / 26 = 24519.00

If you left the job on 18.8.11, you would be entitled to receive Rs. 24,519.00 as gratuity.

You will receive half a month's salary for each completed year. This salary refers to the average salary (basic salary + dearness allowance) of the last six months.

What does 4.81% mean? Based on this, the calculation is not correct. Your detailed answer of the last drawn basic + DA / 26 * 15 * number of years of service is correct. Please explain the right method.

Gratuity Calculation

Your gratuity amount will be calculated as follows: Last basic salary x 15/26 x 5 (years) in case you leave the organization immediately after completing 5 years.

Gratuity Calculation Explanation

Gratuity is calculated based on the last basic salary drawn, which in this case is Rs. 17,000. For each year completed, you will receive 15 days of basic salary.

Steps to Calculate One Year's Gratuity

One year's gratuity is calculated by dividing the basic salary by 26 days (instead of 30 days) and then multiplying the result by 15 days. In this example, (Rs. 17,000 / 26 = Rs. 654 * 15 = Rs. 9,810).

Calculating Total Gratuity for Service Period

To calculate the total gratuity for a specific period of service, multiply the annual gratuity amount by the number of years in service. (Rs. 9,810 * 5 = Rs. 49,050).

Your total gratuity amount will be: Rs. 49,050/-

I hope this explanation clarifies the calculation process.

Regards,
Sudhakaran

Then after 5 years, if we work for 10 years, the same process applies. The calculation for the last basic salary would be: (Last basic salary) x 15/26 x 10 (years). Please let me know.

Regards,
Riyaz.

Dear Riyaz Ji,

Gratuity is payable at the last pay drawn, which also includes dearness allowance and dearness pay, if any, but not other allowances such as HRA, medical allowance, transport allowance, etc. The formula for calculation is as follows:

Gratuity Calculation Formula

Last pay * Number of years of service * 15/26

For the number of years of service, please note that any portion over and above six months is to be rounded off to the next full year. For example:
- Qualifying service of 5 years and six months = 6 years
- Qualifying service of 6 years, four months, and 26 days = 6 years.

Regards

Gratuity Calculation

Your calculations:
Your last drawn salary is $8,500.
Your compensation for 5 years = Basic * Year * 15 days / 26
= $8,500 * 5 * 15 / 26
Total gratuity: $24,519. You received a gratuity amount.

Thanks.

Gratuity Calculation According to the Gratuity Act of 1972

According to the Gratuity Act of 1972, the payment of gratuity is determined by a multiplier set by the Government of India. The calculation is as follows: (Basic + DA) x (15/26) x (number of years of service), with the Basic being calculated based on the last drawn salary only.

Thank you.

Explanation for 4.81%

Employers calculate their commitment to Gratuity in respect of each employee as follows:

It will be 15/26 of their salary (Basic + DA) yearly. Or it will be 15/26/12 of the monthly salary, which in percentage terms is 4.8076% (4.81% when adjusted to two decimal places). Most professionally managed companies set apart every month 4.81% of the salary of each employee to meet the liability under the Gratuity Act. Since 1987, companies have had to take compulsory insurance under Sec 4A from LIC to meet the liability. Large companies have their own approved Gratuity funds in this connection.

Some companies show 4.81% of the salary in the monthly CTC. It is important to note that the formula provided by Mr. Saravanan is not correct.

Regards,
Sanu Soman

Gratuity Calculation

Please note that the gratuity amount is always calculated based on the last drawn Basic and D.A.

Please find below the formula for the same:
= (Basic + DA) / 26 * 15 * Number of years in service

In your case, your gratuity will be:
8500 / 26 * 15 * 5 = 24,519

Thank you.

Gratuity Calculation Formula

Last basic salary * 15/26 * 5
Last basic salary/26 * 15 * 5

Which is the correct formula to calculate gratuity? Please let me know. Some people said the first one, some the second.

Regards,
Riyaz.

I did not understand the formula of Last Basic * 4.81% * Number of years of service. Please present an example of calculation with the above formula for easy understanding.

Hi, The formula for calculating the gratuity amount is as follows:

Gratuity Calculation Formula

\[ W \times Y \times \frac{15}{26} \]

Where:
- W = Last wage drawn (i.e., basic + DA)
- Y = Number of completed years of continuous service (ignoring six months or less, and counting more than six months as a full year)
- 15 = 15 days' salary
- 26 = Number of working days in a month

Therefore, in your case, the gratuity amount would be:
\[ 8500 \times 5 \times \frac{15}{26} = 24519.23 \text{ INR} \] only.

Regards,
Dharmendra
HR Adroit

Gratuity Calculation

Your current basic salary is $8,500.

Number of years of service with the organization: 5 years

Gratuity Amount Calculation

$8,500 ÷ 26 × 15 × 5 = $24,519

Gratuity Calculation Details

Last Drawn Salary (Basic): $8,500 per month for 26 days.

Your Per Day Salary: $326.92 for 15 days.

15 Days' Salary Per Year: $4,903.85 for 5 years of service.

Your Gratuity: $24,519.23.

Gratuity Calculation Details

Last Drawn Salary (Basic): ₹8,500 / 26 days
Your Per Day Salary: ₹326.92 x 15 days
15 Days Salary Per Year: ₹4,903.84 x 5 years completed
Your Gratuity Amount: ₹24,519.23

Thanks,
Bharat Sakpale
[Phone Number Removed For Privacy Reasons]

Hi, thanks for sharing the valuable information regarding gratuity. I am very new to this, so could you kindly explain to me why the 15-day salary needs to be multiplied with the formula? What I mean to ask is, does the number of days vary?

The current basic salary is 8500/-. Therefore, your gratuity is calculated based on your current basic salary using the following formula:

Gratuity Calculation Formula

Gratuity = (Basic/26) * 15 * number of years.

Using your figures: 8500/26 * 15 * 5 = 24519.

Please let me know if you need any further clarification or assistance.

Vasavi,

Up to ₹10 lakh, it is IT exempted. Companies can pay more as well; there is no ceiling for private companies, but ₹10 lakh is the limit for government employees.

Pon

Dear Riyazbasha,

Both calculations will give you the same result. However, the second one will provide more clarity regarding the logic to be used. This is the perfect calculation, and you can continue calculating based on the number of years (service) completed by the person.

Regards,
Sudhakaran

Yes, whatever your years of service may be, the process (formula) remains the same, subject to more than 5 years. I think it's clear now.