When you work in an organization and provide your services continuously for five years, the employer pays a lump sum for the services availed called gratuity. Gratuity is paid under the payment of gratuity act, 1977 - India Code. Completion of five years in the same organization makes you eligible for gratuity but its payment and sum payable depends on other factors as well.
Provided under the payment of Gratuity Act, Gratuity is the amount that an employer pays to its employees for availing their services. It is extended to those employees who have been working in the same organization for over 5 years. You can claim the Gratuity amount only at the time of closure of the service, if you continue working, the sum keeps rolling in coming years with further addition in the amount.
Relaxation in tenure is given if death or permanent physical disability due to accident or sickness of the employee is registered. In case of death of the employee amount of gratuity is payable to the nominee. Gratuity is non-transferable in case of job change, unless the parent organization is the same.
The gratuity can be claimed only if you meet the following eligibility criteria-
Gratuity is payable only after the employee completes five years in the same job. At the time of voluntarily leaving the organization or after termination, the employee can claim the gratuity. While changing the job, the gratuity account is non-transferable unless the parent organization of new and old jobs is the same.
Calculation of the gratuity in India depends on two categories under the payment of gratuity act,1972.
Category 1: Employee covered under the act
Category 2: Employee not covered under the act
These two categories are applicable for both government and non-government employees with various heads applied separately for both as per the requirement. In private organizations, the gratuity is given only if at least 10 employees are working on a single day in the past 12 months.
Gratuity is calculated based on the number of years of the service and last drawn salary by using the following formula-
Gratuity=Last drawn salary*(15/26)* the number of years of the service
*26 is the number of days in a month.
*15 is the day for which gratuity is accounted for.
For this category, the average number of days in a month is taken by 30 days. Gratuity=Last drawn salary*(15/30)*number of years of the service.
For both the cases, the last drawn salary consists of:
A gratuity calculator is an automated tool that calculates the sum payable as gratuity you would receive at the time of leaving the service after at least five years. The gratuity calculator saves you from the tiring calculation of the sum using the above formula. It also works on the same formula, but in an automated way and has no chances of error or variation.
If you are a government employee or working in a private organization, Gratuity is the reward for the services rendered by you and loyalty given to the organization for at least five years. Gratuity can be a good financial backup when you are leaving the job or in transit of a new job. For better financial planning, your sum of gratuity can play a good role and using the gratuity calculator, you can reach the estimated value easily.