How to calculate gratuity?

In simple english, Gratuity means gratitude. So, Gratitude of an employer towards its old employees (old not by age, but by date of employment) is Gratuity.

In today's ERA, where everything is measured in money.Law has also measured this gratitude in money and made RULES for GRATUITY.

Now, what are these rules for GRATUITY?

RULE 1: Who can receive gratuity?

Any employee who has completed 5 Years of service is eligible for gratuity.

RULE 2: How is Gratuity computed?

For calculations,remember only 3 things;

Is the formula:

Gratuity = Salary * 15/26 * number of years in service.

2   Salary is the last basic salary that an employee drew. Salary includes Dearness Allowance (DA) too;

3. While calculating number of years in service, round it off to nearest number.

RULE 3:

By when should gratuity be received?

With in one month of your resignation!!!!!

And if it is not paid then of course, employer should pay interest on it;

OK Guys, now an example:

RAM has served BHAGWAN LIMITED for 4 years and 6 months. The last salary he withdrew was Rs50,000 (Out of which RS 25000 was his basic salary). How much gratuity should he receive?

Please do quick calculation, I am waiting…..

The answer is Rs 72,115.

How??? Let me explain.

The formula is>>>>>>>

Gratuity = Salary * 15/26 * number of years in service.

Right?

Let us put the figures now ……

Salary = Basic Salary = 25,000 ( not 40,000, because 40,000 is total salary )

Number of years in service = 5 (not 4 because 4 years 6 months are rounded off to nearest number which is 5)

So, Gratuity amount is

= 25000 * 15/26  * 5

= 14,423 * 5

= 72,115

Before you go, shall I tell a thing?

Ram (in example above) isn't entitled for a gratuity.

Why?

Because, he hasn't completed five years of service.