Gratuity Rules: What Is Gratuity And How Is It Calculated? Know Rules For Government And Private Sector Employees

Gratuity Rule:  Companies offer a gratuity amount to their honest workers. Employees get the benefit of gratuity when they work for a set period in an organization. If he quits or changes his job before the pre-defined period, he will not get the benefit. In such a scenario, the question often arises if the gratuity regulations are different for government and private sector employees. The answer to this is, that whether you are an employee of the government or are doing a private job, the gratuity regulations are the same for you.

Earlier this month, the Allahabad Court ruled that if an employee chooses to retire after 60 years or retires at 62 years, he will get the benefit of gratuity in both forms. Several companies did not provide the benefit of gratuity to the employee because the employee had chosen the option of retirement at 62 years.

What is gratuity?

Gratuity is a special amount that a company gives to its employees. When an employee works in the same organization for 5 years, he is eligible for gratuity. All government employees as well as private employees get the benefit of the scheme. The Payment and Gratuity Act applies to all the companies, factories, mines, oil fields, ports, and railways in the country. Remember, if more than 10 people work in a company or shop, they still get the benefit of gratuity.

When does an employee get gratuity money?

Employees become eligible to get gratuity after working in any organization for 5 years. But in some cases, this time limit is shorter. As per Section-2A of the Gratuity Act, if an employee works in an underground mine, then he can take advantage of gratuity after completing four consecutive years and 190 days.

Whereas in other organizations, gratuity is given only after 4 years 240 days (i.e. four years and eight months). The benefit of gratuity is available after leaving the job or after retirement. You cannot avail of this benefit while working. You get this benefit when you resign from the company. The notice period is also included in the gratuity as comes under 'continuous service'.

How is gratuity calculated?

You can calculate gratuity very easily. You can easily calculate gratuity by adding basic salary and dearness allowance x (15/26) x (number of years worked). For example, if your basic salary and dearness allowance together is Rs. 35,000 and you have worked in the company for 7 years, then the total gratuity you will get is 35,000 x (15/26) x 7 = Rs. 1,41,346.