Understanding Gratuity Calculation: How to Use This Excel for Accurate Settlements

Understanding Gratuity Calculation

This Excel is for understanding the Gratuity Calculation, which is a tentative calculation to find the amount for gratuity when a person leaves the organization, or we say at the time of full and final settlement.

Formula for Gratuity Calculation

Formula: Last Drawn Salary/26*15*No of Years of Service.

Rules for Gratuity Calculation

1) It consists of a minimum of 5 years of service as per the Gratuity Act 1972. If a person completes more than 6 months, then it counts as 1 year.

2) However, a person with a minimum of 4 years and 8 months of service is considered as "0" zero years of gratuity service.

3) If he works for 4 years and 8 months or more but less than 5 years, he is still considered to have 5 years of service for gratuity to be applicable.

Revised formula for correcting error: 5.6 years to 6 years.

Thank you for sharing the Gratuity calculator—this is very helpful. However, I believe it is missing a crucial point. According to the gratuity act, a six-month period should be considered as a full year if the number of working days is 95/120 days (as the case may be).

I have a scenario where an employee joined on 18 Jan 2008 and their last working date was 15 July 2021, resulting in a service period of 13 years, 5 months, and 28 days. Your file indicates a total of 13 years of completed service. Nevertheless, in line with the gratuity act, it should be recognized as 14 years since the employee has fulfilled the requirement of working more than 95/120 days in the '5 months, 28 days' period.

Could you shed some light on this matter? I am attaching your updated template for your reference.