What is Gratuity?
Gratuity is a monetary benefit given by an employer to an employee for services rendered to the organization. It is usually paid at the time of retirement or resignation, provided the employee has completed at least 5 years of continuous service.
Eligibility
- Must be eligible for superannuation.
- Should have retired or resigned after 5 years of continuous service with the same company.
- In case of death or disablement, the 5-year rule is relaxed.
Formula
The gratuity calculation formula used in India is:
Gratuity = (15 × Last Drawn Salary × Tenure) / 26
- Last Drawn Salary = Basic Salary + Dearness Allowance (DA)
- Tenure = Number of completed years of service
- 15/26 = Represents 15 days out of 26 working days in a month