Estimate your end-of-service retirement benefits instantly
Estimated Gratuity Payable:
0.00
*Calculation is based on the standard 15/26 rule used in the Payment of Gratuity Act.
What is Gratuity?
Gratuity is a monetary benefit provided by an employer to an employee in recognition of their long-term service to the organization. It is a defined benefit plan and is typically paid at the time of retirement, resignation, or termination, provided the employee has completed a minimum period of service (usually 5 years).
How the Gratuity Rate is Calculated
The standard formula for calculating gratuity for employees covered under the Payment of Gratuity Act involves the last drawn salary and the number of completed years of service. The "15/26" factor represents 15 days of salary out of 26 working days in a month.
Gratuity = (Last Drawn Salary × 15 × Tenure) / 26
Key Components Explained
Last Drawn Salary: This includes your Basic Salary plus Dearness Allowance (DA). Other components like HRA or bonuses are generally excluded.
Tenure: The number of years you have worked. In many jurisdictions, if you have worked more than 6 months in your final year, it is rounded up to the next full year (e.g., 5 years and 7 months becomes 6 years).
The 26-Day Rule: For the purpose of gratuity, a month is considered to have 26 working days, excluding Sundays.
Eligibility Criteria
To be eligible for a gratuity payout, an employee must generally meet the following conditions:
The employee must be eligible for superannuation.
The employee must have retired or resigned after a continuous service of at least 5 years.
In cases of death or disablement due to accident or disease, the 5-year minimum service rule is usually waived.
Realistic Calculation Example
Suppose an employee has a monthly basic salary of 80,000 and has served the company for 12 years.