Confused About Gratuity Calculation: Should We Pay for 5 or 6 Years of Service?

Dear Sir/Madam/HR Professionals, Kindly provide me with the latest gratuity calculation. One of my colleagues has recently resigned and has completed 5 years and 3 months in the current organization. Kindly advise if we have to calculate and pay him the gratuity for 5 years or 6 years. I am confused about whether to pay him for 5 years or 6 years as he has completed more than 5 years of continuous service.

Thanks and warm regards, Vinayak Sonawane

In this case, the calculation for gratuity would be: Current Basic/26*15*5. There will be no payment for an extra 3 months.

Gratuity Calculation Formula

Gratuity = (last drawn Basic + DA) / 26 x 15 days x No. of years of service

Regards,
Bhav Narayana
Assistant Manager HR

After completing 5 years in the organization, every 6 months that an employee completes is rounded and considered as 1 year.

You have to consider only 5 years of service for calculating gratuity. If he had served for more than six months, then you can consider it as 6 years. However, in this case, he has served for only 3 months after 5 years of service. Therefore, you have to calculate for 5 years only.

Regards,
Kumar

In this case, you should consider only 5 years. You can round off more than six months to one year.

Regards,
Suresh

Eligibility Criteria for Gratuity

Regarding your query on the above subject, please refer to Section 4 for the eligibility criteria for an employee to claim gratuity. This means that any employee who has completed 5 years of continuous service at the time of resignation or retirement, or upon reaching the age of superannuation, is eligible. The calculation should be based on 15 days' wages for every completed year of service or part thereof exceeding six months. In your case, the employee is eligible for 5 years only.

Regards,
P.V. Rama Rao
[Phone Number Removed For Privacy Reasons]

Dear All,

Our company has opted for the LIC group gratuity scheme. Are there any alternative options for the employer to maintain their employee gratuity scheme? Any suggestions in this regard would be appreciated. Please clarify.

Regards,
R. Udayakumar

Since the person has worked for 5 years and 3 months, 5 years should be considered as 6 years. If a person has worked for more than 6 months, then it is rounded off to 6 years.

What are the Gratuity limits under THE PAYMENT OF GRATUITY ACT, 1972 before Rs. 3,50,000/-? And from which date is Rs. 3.5 Lakhs applicable, and what are the limit amounts before that? Please provide references with evidence.