Gratuity Calculation Dilemma: How to Count Completed Years for 6 Years and 7 Months?

Hello seniors,

I have a query regarding Gratuity calculation. Suppose an employee resigns from his job after completing continuous service of 6 years and 7 months. What will be the number of completed years of his continuous service?

Dear Sanjib,

We need to calculate it as 7 years of continuation of service. Anything equal to or more than 6 months should be counted as a year.

Thank you, Manoj, for solving my query. I have another question regarding Gratuity. What should be the percentage of Gratuity in the calculation of CTC?

Gratuity Calculation Formula

As you are aware, Gratuity is paid as per the provisions of the Payment of Gratuity Act, 1972. The formula applied as per the provisions of the act is as follows: Gratuity Payable = W x Y x 15/26, where W = Last Wage drawn i.e., basic + DA, Y = number of completed years of continuous service, 15 = 15 days' salary, 26 = No. of working days in a month.

Provident Fund Act and Gratuity Percentage

The Provident Fund Act talks about a 12% deduction from wages towards PF, but there is no percentage in Gratuity calculations under the provisions of the Act. However, in order to make a CTC amount, you can use the formula or keep a provision of about 4.5% of CTC, I feel.

Dear POWAI Office,

If you are going to add employer contribution in CTC, then it has to be 4.81% of Basic + DA of the wage component.