When an employee will be eligible to get gratuity payment from the employer?


Gratuity is a benefit that is payable under the Payment of Gratuity Act 1972. It is paid by company in the time of separation from the particular organization after serving minimum of 5 years. It might be viewed as a monetary "thank you" or a way of expressing thanks to an employee for their long-term contribution to a company.

Gratuity Eligibility Criteria:

Following are the few instances when an employee will be eligible to receive gratuity.

1. An employee should be eligible for superannuation

2. An employee retires

3. An employee resigns after working for 5 years with a single employer

4. An employee passes away or suffers disability due to illness or accident

Gratuity Calculation Formula:

The components that go into calculating the gratuity amount are shown below. The sum is also determined by the number of years you've worked for the organisation and your last drawn salary.

Gratuity = No. of years of service*Last drawn (Basic+DA)*15/26

How to Calculate Gratuity?

For example:

 Amit has worked with a company for 25 years and had Rs.30,000 as his last drawn basic plus DA amount, then,

Gratuity Amount for Amit = 25*30,000*15/26 = Rs.4,32,692

An employer, on the other hand, has the option of paying a higher gratuity to an employee. Also, for the number of months worked in the preceding year, everything over 6 months is rounded up to the next higher number, while anything less than 6 months is rounded down to the previous lower number.

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