Gratuity: Gratuity is a kind of reward which is given to an employee in return for working for 5 years or more in a company. When an employee works in a company for a long time, he is given a certain amount as a reward by the company if he leaves the job after a fixed time period. Which is called gratuity.
A minimum time limit of 5 years has been set for gratuity in India, that is, if an employee works in a company for 5 years, then he gets a certain amount as a reward from the company on leaving the job. If you have been working in a company for the last 20 years, and are now planning to leave, then in such a situation, how much gratuity will you get according to the current gratuity rules of the country, let us understand the complete details including calculation.
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rule related to number of employees
If 10 or more employees are working in a company, then it is mandatory for the company to pay gratuity to its employees. Both government and private companies are included in this. Along with this, shops and factories are also included in its scope.
The company should be registered under the Gratuity Act
Before applying for gratuity, you must check whether your company is registered under the Gratuity Act or not. Because if your company is registered then it will have to pay you gratuity as per the rules, but if the company is not registered then it depends on the company’s wish to pay gratuity or not.
In India, the minimum time limit for gratuity is 5 years. If an employee has worked for 4 years and 8 months in a company, then it will be considered as five years. But if the employee has worked for 4 years and 7 months in a company, then it will be considered as 4 years. In such a case, the employee cannot take gratuity. In this, the notice period will be counted in the days of work.
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In case of death of the employee while on duty
If an employee dies before retirement or before leaving the job, then the company will have to pay gratuity to the employee’s nominee. The rule of minimum time limit will not apply here.
This is the rule for calculating gratuity
There is a rule to calculate gratuity – (Last salary) x (number of years worked in the company) x (15/26). The 4 Sundays in a month are not considered as week off, due to which only 26 days are counted in a month and gratuity is calculated on the basis of 15 days.
For example, if an employee worked in a company for 20 years and his last salary was around Rs 50,000, then we will apply this formula to find out his gratuity amount.
How much gratuity will the employee get based on this formula?
Last Basic Salary: Rs 50,000
Tenure of service: 20 years
Basic salary X tenure of job: 50,000 X 20 = 10,00,000
(Basic salary X tenure of job) X15/26=10,00,000 × 15/26= Rs 5,76,923 i.e. Rs 5.76 lakh
Calculating gratuity is very easy with the help of the above formula. Using your last drawn basic salary and the duration of the job, you can estimate the gratuity amount you will receive upon leaving the job.
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It is important to note that the employees of private companies do not get the benefit of dearness allowance like the government employees. In such a situation, in the above formula, gratuity is calculated by using only the basic salary instead of the final salary.
Suppose if the last salary of the employee is around Rs 50,000. In which the basic salary is Rs 25,000, then the gratuity received on the basis of the basic salary as per the above formula will be as follows.
Gratuity Calculation
Last Basic Salary: Rs 25,000
Tenure of service: 20 years
Basic salary X tenure of job: 25,000 X 20 = 5,00,000
(Basic salary X tenure of job) X15/26: 5,00,000 × 15/26= 2,88,461.53
At present, some companies have fixed the gratuity of their employees. In such a situation, the possible amount to be received as gratuity by the employees who have worked for 5 years or more in the company is fixed.
,Note: The gratuity amount calculated is based on your last salary and job tenure. This amount may change depending on the salary, job tenure and any amendments in the relevant laws.,