Gratuity calculator: Almost all organized companies now deduct a small portion from the employee's salary as gratuity. According to the Gratuity Act 1972, if an employee serves the same company continuously for 5 years then he is entitled to take gratuity. Gratuity is a gift received by an employee from his company.
For gratuity, a small amount is deducted from the employee's salary but the company invests more money in it. The amount of gratuity an employee will receive depends on his salary and total working period. Generally, the amount of gratuity is paid after the employees retire, resign or are fired from the job.
What is the formula to calculate gratuity?
There is a special formula to calculate the amount of gratuity. This formula is (final salary) x (number of years worked in the company) x (15/26). Here the last salary means the average of the last 10 months' salary of the employee. Basic salary, dearness allowance and commission are also counted in the final salary. There are four Sundays in every month due to which only 26 working days are counted in the month and gratuity is calculated based on 15 working days.
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Gratuity should not exceed 20 lakh
Let us understand this with an example. Suppose an employee has served a company for 20 years. And his last salary was Rs 75000. Accordingly, if calculated using the formula (75000) x (20) x (15/26), the total amount is Rs 8,65,385. If the company wishes, it can give more than the calculated gratuity amount to the employee, but the amount of gratuity should not exceed Rs 20 lakh.
For an unorganized sector company
If the employee's company is not registered under the Gratuity Act, then the employee does not officially have the right to claim on gratuity price. But still, if the company wishes, it can give a gratuity to its employees. However, the formula for determining gratuity is different in this scenario. In this case, the amount of gratuity equal to half a month's salary for every year is considered standard. Working days in a month will be counted as 30 days instead of 26.