Understanding the Gratuity Payout Calculator
Gratuity is a monetary benefit given by an employer to an employee as a token of appreciation for services rendered to the organization. Under the Payment of Gratuity Act, 1972, organizations with 10 or more employees are legally required to provide this benefit upon resignation, retirement, or superannuation after completing the minimum qualifying period.
The Gratuity Calculation Formula
The standard formula used to compute gratuity for employees covered under the Act is:
Gratuity = (15 × Last Drawn Salary × Tenure) / 26
- Last Drawn Salary: Basic salary plus Dearness Allowance (DA) drawn immediately preceding the cessation of employment.
- Tenure: Total completed years of service. Any period over 6 months is typically rounded up to the nearest year.
- The Factor 26: Represents the number of working days in a month considered for calculation purposes.