Gratuity Calculation: What will be your gratuity for Rs 62,000 last-drawn salary after 6 years and 8 months of service?
To get gratuity, you need 5 years of continuous service. Any service period of 6 months or more is counted as a full year. Organisations employing 10 or more individuals over the past years and following the Payment of Gratuity Act, 1972, are required to pay gratuity.
Gratuity is money that an employer pays to an employee to recognize their long service. Under the Payment of Gratuity Act of 1972, employees are entitled to receive gratuity after completing 5 years of continuous service with an employer. If a company falls under the Payment of Gratuity Act of 1972, it cannot count itself out. On that note, let’s find out what your gratuity will be for Rs 62,000 last-drawn salary after 6 years and 8 months of service.
Photo source: Pixabay/Representational
(Disclaimer: Our calculations are projections and not investment advice. Do you own due diligence or consult an expert for financial planning)
What is gratuity?
Gratuity is a lump sum amount given to an employer as a token of appreciation for their long-term service. It is a type of reward for an employee's dedication and loyalty for a continuous service of 5 years.
What should be the ideal length of service?
Employees are eligible for gratuity after completing 5 years of continuous service with the same employer, as per the Payment of Gratuity Act, 1972.
What are the eligibility criteria for receiving gratuity?
To get gratuity, employees need:
1. 5 years of continuous service
2. Work in an organization covered by the Payment of Gratuity Act, 1972.
When do you become eligible for gratuity?
You can get gratuity in the following situations:
When you retire from your job
If you quit after working for the same company for 5 years
If you die or become disabled due to illness or accident while working
When you're eligible for superannuation (a type of retirement benefit)
What are the organisational criteria for gratuity?
Organisations employing 10 or more individuals over the past years and following the Payment of Gratuity Act, 1972, are required to pay gratuity.
How are service years counted for gratuity calculation?
To get gratuity, you need 5 years of continuous service. Any service period of 6 months or more is counted as a full year.
What determines the gratuity amount?
The number of years and the last-drawn basic salary of an employee are used to calculate the gratuity amount.
Can a company opt out of the Payment of Gratuity Act?
If a company falls under the Payment of Gratuity Act of 1972, it cannot count itself out.
Formula to calculate gratuity
(Last Drawn Salary x Number of Years of Service) X 15/26
Here, 15 refers to 15 days’ wages per year, and 26 refers to 30 days in a month, excluding Sundays.
What will be your gratuity on Rs 62,000 basic salary for 6.8 years of service?
Let’s calculate gratuity for an employee with a basic salary of Rs 62,000, 6 years, and 7 months of service (rounded to 7 years).
Gratuity = (62,000 × 7 × 15) ÷ 26
Gratuity = Rs 2,50,384