Gratuity is a reward received by an employee from his company. A small part of the gratuity is deducted from the salary of the employee, but a large part is given by the company.
According to the Gratuity Act 1972, if you work in a company for 5 consecutive years, then you are considered entitled to gratuity. Gratuity is a reward received by an employee from his company. A small part of the gratuity is deducted from the salary of the employee, but a large part is given by the company. The amount of gratuity you will get depends on the current salary and the total tenure of the job. The amount of gratuity is paid after the employees retire, resign or are fired.
Gratuity is calculated with this formula
A formula to calculate gratuity is – (last salary) x (number of years worked in the company) x (15/26). Last salary means the average of your last 10 months salary. Basic salary, dearness allowance and commission are included in this salary. Due to 4 days of Sunday being week off in the month, 26 days are counted and gratuity is calculated on the basis of 15 days.
Understand the method of calculation
Let’s say you worked in a company for 20 years. Your final salary is Rs 75000. In such a situation, after calculating (75000) x (20) x (15/26) according to the formula, the total amount will come out to Rs 8,65,385. You will get this amount as gratuity from the company. If the company wants, you can also pay more than the amount of gratuity based on the prescribed formula, but according to the rules, gratuity cannot be given more than Rs 20 lakh.
In this case the calculation is different
When the company or institution is not registered under the Gratuity Act, then the employees are not covered under the Gratuity Act. But in such a situation, if the company wants, it can give gratuity to the employee, but in such a situation the formula for fixing gratuity becomes different. In such a situation, the amount of gratuity will be equal to half a month’s salary for every year. But the number of working days in a month will be considered as 30 days, not 26.
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