Gratuity Calculator: Discover Your Entitlement After 5, 7, or 10 Years of Service

According to the provisions of the Gratuity Payment Act of 1972, if you have completed continuous service of five years in any company, you become eligible to receive gratuity from that company. This right extends to companies covered under the ambit of this legislation, including those where 10 or more employees work.

Understanding the Gratuity Calculation Formula

Gratuity is a sum provided by a company to its employees as a reward for their long and loyal service. Generally, this amount is given upon leaving the job or upon retirement. If you have also worked continuously for 5, 7, or 10 years in a company, you are eligible to receive gratuity. To find out how much gratuity you are entitled to, you can use the following Gratuity Calculation Formula.

Gratuity Calculation Formula:

(Last drawn salary) x (Number of years worked in the company) x (15/26)

Here, the last drawn salary refers to the average salary received in the last 10 months. This salary includes the basic pay, dearness allowance, and commission. Since there are 26 working days in a month, considering 4 Sundays off, gratuity is calculated based on 15 days per month.

To calculate gratuity, you can use the following formula:

Gratuity = (Last drawn salary) x (Number of years worked in the company) x (15/26)

Let’s understand this with examples:

1. If you have worked for 5 years in a company with a last drawn salary of 35,000 rupees:

Gratuity = (35,000) x (5) x (15/26) = 1,00,961 rupees

2. If you have worked for 7 years in a company with a last drawn salary of 50,000 rupees:

Gratuity = (50,000) x (7) x (15/26) = 2,01,923 rupees

3. If you have worked for 10 years in a company with a last drawn salary of 75,000 rupees:

Gratuity = (75,000) x (10) x (15/26) = 4,32,692 rupees

You can calculate the gratuity amount based on your last drawn salary and the number of years you have worked in the company using this formula.

Gratuity Calculation in Unregistered Companies: A Different Scenario

In situations where companies or organizations are not registered under the Gratuity Act, employees do not automatically receive gratuity benefits as per the Act’s provisions. However, even in such circumstances, companies have the discretion to provide gratuity to their employees if they wish to do so. 

Yet, the formula for calculating gratuity in such cases differs. In this scenario, the gratuity amount equals half of the monthly salary for each completed year of service. However, the calculation considers 30 days in a month for the purpose of determining the number of working days, not 26.