How Do I Calculate and Process a Colleague's Gratuity for the First Time?

Dear All, this is the first time that I have had the chance to release someone's gratuity. Since I have no experience in this field, I seek your help.

Colleague's Gratuity Details

One of my colleagues joined this company in May 2008 and has resigned from his position. His notice period has a shortfall of 5 days, ending on 1st October 2013. His last drawn gross monthly salary would be INR 57,820/-, including a Basic of INR 20,410/- and other allowances as per his salary structure.

Please let me know what his amount of gratuity should be and the process for applying for/getting the gratuity amount.

Thanks in advance,

Sonali

Dear Sir, I have mentioned everything in detail in my post, including the separating person's date of joining. He has completed 5 years and 4 months of continual service in our company. Secondly, I am not the one who is leaving the company. It's my colleague, and I have the responsibility to settle all his dues.

Regards, Sonali

The gratuity calculation formula is as follows: W x Y x 15/26, where W equals the last wage drawn, i.e., basic + DA, and Y equals the number of completed years of continuous service. For the calculation, six months or less should be ignored, and more than six months should be counted as a full year.

Gratuity Calculation Details

Specifically, the calculation is based on 15 days of salary over 26 working days in a month. Therefore, the formula for gratuity calculation is as follows:

Gratuity = (Last basic + DA) x 15/26 x number of service years

Your calculated gratuity amount is 20410 x 15/26 x 5 = 58875/-.

While making the payment of gratuity, please check the salary details in the gratuity insurance and then calculate the gratuity (i.e., whether salary + HRA + allowances, etc., are included or only the salary amount has been insured). The formula is salary x 15 x no. of years of service / 26.

Thanks,
VK.Sood

For the purpose of gratuity calculation, only Basic and Dearness Allowance (if part of the salary structure) should be considered.

Dear Divya, I thank you for the clarification. I would be glad if you could also shed some light on my doubts regarding Gratuity Insurance (please refer to my previous post).

Regards,
Sonali

Gratuity insurance policy is very much mandatory. If your company's salary structure does not have "DA," then it need not be considered. All other extra allowances that you have mentioned in your post should not be counted for gratuity calculation.

Thanks,
Anand G