Gratuity is the additional monetary compensation paid by the employer to the employee in return for the long term employment services offered by the employee. Employees who have been employed in the company for five years or more are paid gratuity. Gratuity and its rules and regulations are governed by the Payment of Gratuity Act 1972.
Eligibility for Gratuity
You are eligible for gratuity if you meet the following conditions:
You can calculate the gratuity with the help of the following formula:
Gratuity: AB15/26 Where,
| Years of Employment | Rate |
|---|---|
| Less than one year | 2x Basic Pay |
| One year or more but less than 5 years | 6x Basic Pay |
| 5 years or more but less than 11 years | 12x Basic Pay |
| 11 years or more but less than 20 years | 20x Basic Pay |
| 20 years or more | Half of emoluments (salary) for every completed 6 monthly period subject to maximum of 33 times of emoluments |
Example - Mr. X has worked for PNR Firm for 10 years and his last drawn salary (Basic + Dearness Allowance) is Rs 30,000. Therefore, Mr. X’s gratuity amount would be - 10 x 30,000 x 15/26 = Rs. 1,73,076 (Gratuity is dependent upon the total number of years served in the company and the last drawn salary)
