03/04/2025
Gratuity is a token of appreciation for an employee’s long-term commitment, providing a lump sum as a post-employment benefit.
The gratuity amount is calculated using the following formula:
Gratuity = (Last Drawn Salary × 15 × Number of Completed Years of Service) / 26
As per the Payment of Gratuity Act, 1972, gratuity becomes payable after 5 or more years of continuous service with the same employer. However, in cases of disability due to an accident or illness, gratuity may be paid even before completing 5 years. It provides financial support to employees when they leave a job, helping them stay financially stable and secure as they move to the next stage of their career.
Additionally, if you have worked for more than 6 months in a particular year, your service duration will be rounded up to the next full year. If you have worked for less than 6 months, it will be rounded down.
For example:
4 years 3 months = Considered 4 years
4 years 8 months = Considered 5 years
5 years 5 months = Considered 5 years
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