How is gratuity calculated?

Gratuity is a monitory benefit an employee receives for the services he/she gives to an organisation. All the companies that come under the Gratuity Act offer this benefit to the employee after he/she completes five or more years of service with the same employer. An employee receives gratuity after resignation, retirement or after being laid off.
How to Calculate Gratuity
Gratuity amount depends on the time period of service and last drawn salary.
The amount is calculated according to this formula: Last drawn salary (basic salary and allowance) X number of years completed in the organisation X 15/26.
As per this formula, the time period of six months or more is considered as one full year. Thus, if you have completed four years and eight months of service, the number of years would be taken into consideration as five years for calculation of gratuity benefit.
On the contrary, if the service tenure is five years and five months, for gratuity calculation it will be considered five years only.
However, an employer can give higher amount than the gratuity with the mentioned formula.
Source: Times of India

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