How to Calculate Gratuity?

  • Created Date04 Apr, 2021
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Looking for Gratuity formula or calculation.  I know it is paid by an employer when an employee leaves the job after serving the same organization for a minimum period of 5 years. 


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Hi, Sagrika,

Listed below are the components that go into the calculation of gratuity amount. The amount is also dependent upon the number of years served in the company and the last drawn salary.

Gratuity = N*B*15/26

N = number of years of service in a company

B = last drawn basic salary plus DA

How to Calculate Gratuity?

For example, you have worked with a company for 20 years of and had Rs.25,000 as his last drawn basic plus DA amount, then,

Gratuity Amount for Amit = 20*25,000*15/26 = Rs.2,88,461.54

However, an employer can choose to pay more gratuity to an employee. Also, for the number of months in the last year of employment, anything above 6 months is rounded off to the next number while anything below 6 months in the last year of employment is rounded off to the previous lower number.