How Do I Calculate My Gratuity After 5 Years of Work? Need Help with Salary Details

Hi all,

I want to calculate my gratuity. Here is my salary annexure for one month:
Basic: 4000
HRA: 2000
Special Allowance: 4886

Please help me calculate the gratuity for my 5 years of work. I will be waiting for your reply.

Hi,

Gratuity calculation formula is as follows:
Gratuity = [(Basic + DA) X 15 X No. of years of Service] / (No. of working days in a month)

So, in your case:
Gratuity = (4000 X 15 X 5) / 26
= Rs. 11538.46

It's important to note that for gratuity calculation, HRA and other allowances are not considered.

Truly Yours,
Kumar H. P.

Hi, may I know what the "15" represents in the formula? Also, how can the number of working days be fixed at 26 per month? Wouldn't this number vary? If not, what about public holidays? Please clarify...

Dear Navya,

Gratuity is paid 15 days per month. According to the Gratuity Act, a month means and includes 26 days (excluding 4 weekly off variations not observed).

Better views invited.

Vasanth

As per the Gratuity Act, an employee is eligible for gratuity only if they have completed a continuous period of 5 or more years. Gratuity is payable for 15 days per year for the period the employee has worked in the organization. Also, note that after the completion of 5 years, every period in excess of 6 months is treated as one completed year. For example, if an employee has worked for 6 years and 8 months, then they will be eligible for a gratuity of 7 years. Gratuity is calculated as (Basic + DA) x 15 x number of years / 26.

Thanks,
Aditya Gupta

Dear all,

I am working in Tamil Nadu Electricity Board as a Junior Engineer. My salary structure is as follows: Basic Pay = 6825, Dearness Pay = 3413, Dearness Allowance = 6552, House Rent Allowance = 1100, City Compensatory Allowance = 300, Medical Allowance = 50. I have a total of 11 years of service.

I have two questions:
1) Can I include Dearness Pay in calculating Gratuity?
2) I calculated my Gratuity as follows: (6825 + 3413 + 6552) * 15 * 11 / 26 = 106552. Is this correct? Please share your views.

Regards

Dear [Name],

If the payment of gratuity is to be received by you as per the Payment of Gratuity Act, 1972, and not in accordance with any other rules, then you are correct in saying that Dearness Pay (D.Pay) will be included for calculation purposes. You have also rightly calculated the amount of gratuity as per the provisions of this Act.

Opinion submitted as requested.

Regards,
R.N. Khola
Skylark Associates, Gurgaon (Haryana)
Labour Law & Legal Consultants

Gratuity Calculation: Months vs. Years

(Basic + DA) x 15 x Number of months of service spent in that company (i.e., 3 years = 36 months) will be calculated using 36 months/26 working days of the month.

Gratuity = (Basic + DA) x 15 x 36 months (36 months = 3 years of service in the company)/26

Why do we equate 36 months to 3 years? If we analyze the ethics of salary, we are paid for a job done, whether per day, week, month, or year.

In the context of gratuity, if you are paid, for example, 1000 per month, annually, you will receive 1000 x 12 months of the year = 12000.

We do not work once a year and then again the next year. What about the days, months of struggles, and sacrifices made going to your workplace? Don't you see that all these are overlooked in the incorrect calculation of gratuity using years of service instead of months spent in the company?

The formula for gratuity as (Basic + DA) x 15 x years of service / 26 is incorrect.

Correct Gratuity Formula

Let's discuss the correct formula to use:

(Basic + DA) x 15 x Months of services spent in the company / 26. This is the correct one.

Am I wrong? Please share your point of view as well.

Regards,
Mr. N. B. PATRICE