$$$ The Period of Service For the Gratuity Payment:
Your gratuity increases with the increase of the service period. But to get the gratuity you must complete 5 years in the service (more than 4 years 6 months).
For the gratuity calculation, the years of service are rounded off to the nearest integer. It means if you have completed the 7 years 7 months in the service, the length of service for gratuity calculation would be 8 years. Similarly, if you have completed the 9 years and 5 months, the period for gratuity calculation would be 9 years.
$$$ According to the law for gratuity calculation your salary will include only the following component:
Basic Salary
Dearness Allowance (if any)
It means HRA, bonus, special allowance and reimbursements are not taken for the gratuity calculation. Now you know, why the private sector employers try to keep basic salary low.
$$$ Formula Of Gratuity Calculation:
According to the gratuity rules, you must get the salary of 15 days for every completed years as gratuity. It means if you have completed 5 years in the service you must get the gratuity of one day salary *15*5. It seems very simple.
But what do you think what is the salary of a day. Will it be a monthly salary divided by 31 or a monthly salary divided by 30? No. It would be a monthly salary divided by 26. Why? It is because, according to labor law, every employee is entitled for weekly offs. Therefore, the average working days in a month is not more than 26 days. You get the monthly salary for the work of 26 days. Hence, your one day salary would be a monthly salary divided by 26.
Gratuity = Number of years * Last drawn salary of 15 days
= Number of years * 15/26*monthly salary
Example of Gratuity Calculation
A Person works in a food processing company as marketing manager. He gets the basic salary of Rs 26000, dearness allowance of Rs 8000, special allowance of 21,000 and reimbursements of 45,000. After 6 years 8 months of service he resigns from the job. What would be his gratuity.
The last drawn salary of Person
= Basic salary +DA
= 26,000+8000
= 34,000
Years of Service
= 6 years 8 months
= 7 years
Gratuity
= Salary * years*15/26
= 34,000*7*15/26
= 1,37,308
It is sufficient to understand the all about Gratuity