Understanding Gratuity: How Are Working Days and Partial Years Calculated?

Hi, I completed 5.6 years in the organization. I also understand that the Gratuity Rule is: Last Basic/26 Days × 15 Days × Number of working years. However, my questions are based on my understanding:

a) In the Gratuity rule, 26 days are taken on the basis of 26 working days in the month. However, in our organization, Saturday/Sunday are considered weekly offs. So, should calculations be based on 22 working days or 26 working days? Please guide.

b) I completed 5 years and 6 months and will be leaving the organization in the next 20 days. Please help me understand if gratuity will be calculated based on 5 years or 5 years and 6 months.

Waiting to hear soon.

Thanks,
Amit

Gratuity = salary * 15/26 * No. of years of service. If your service is 5 years and 6 months, it will be rounded down to 5 years. For 5 years, 6 months, and 1 day, it will be rounded up to 6 years.

Regards,
Abbas.P.S

Gratuity Formula as Per Government Regulations

The gratuity formula is framed by the government under the Payment of Gratuity Act. We should follow this formula irrespective of the different number of working days in a month in various companies.

Regards,
Ganesh.H.N

To the point answers to your questions are as under:

As per the Payment of Gratuity (POG) Act, the dividing factor for monthly salary calculation is 26 days. Even though your organization operates for 22 days, you are paid for 30/31 days as your monthly salary, including holidays. Therefore, there is no question of using a dividing factor of 22 days.

According to the POG Act, for the computation of the number of years for gratuity, 6 months and above are considered a full year. Therefore, your gratuity will be calculated for 6 years.

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Regards.