Gratuity Calculator
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Gratuity is a monetary benefit paid by an employer to an employee in recognition of long-term continuous service upon retirement, resignation, superannuation, or termination. Under statutory labor laws (such as the Payment of Gratuity Act), employees who complete 5 or more years of continuous service with an organization are legally entitled to receive a lump-sum gratuity payout.
Our free Gratuity Calculator computes your total statutory gratuity payout based on your last drawn basic salary, Dearness Allowance (DA), and completed years of tenure.
How to Calculate Employee Gratuity Payout
Gratuity calculations depend on whether the organization is covered under statutory gratuity legislation.
Formula for Employees Covered Under Gratuity Act (15/26 Rule):
Gratuity Payout = ( 15 / 26 ) × Last Drawn Basic Salary × Completed Years of Service
Last Drawn Basic Salary = Monthly Basic Salary + Dearness Allowance (DA)
Formula for Employees NOT Covered Under Gratuity Act (15/30 Rule):
Gratuity Payout = ( 15 / 30 ) × Average Monthly Basic Salary (Last 10 Months) × Completed Years of Service
Service Tenure Rounding Rules (Covered Under Act):
- If the final year of service exceeds 6 months, it is rounded UP to the next full year (e.g., 7 years and 7 months = 8 years of service).
- If the final year of service is 6 months or less, it is rounded DOWN (e.g., 7 years and 5 months = 7 years of service).
Gratuity Payout Reference Chart by Salary & Tenure
The table below displays sample gratuity payouts under the 15/26 Statutory Gratuity Act rule across different completed tenures:
| Last Drawn Monthly Basic + DA | 5 Years Service | 10 Years Service | 15 Years Service | 20 Years Service |
|---|---|---|---|---|
| $3,000 / month | $8,653.85 | $17,307.69 | $25,961.54 | $34,615.38 |
| $5,000 / month | $14,423.08 | $28,846.15 | $43,269.23 | $57,692.31 |
| $8,000 / month | $23,076.92 | $46,153.85 | $69,230.77 | $92,307.69 |
Step-by-Step Calculation Example
An employee resigns after working at an organization for 9 years and 8 months. Their last drawn salary details are:
- Monthly Basic Salary: $4,500.00
- Dearness Allowance (DA): $500.00
- Total Last Drawn Basic + DA: $5,000.00
- Exact Tenure Worked: 9 Years and 8 Months (Rounded to 10 Years)
Step 1: Determine Effective Completed Service Years
Since 8 months exceeds 6 months, service tenure rounds up to 10 completed years.
Step 2: Apply 15/26 Gratuity Formula
Gratuity Payout = ( 15 / 26 ) × $5,000.00 × 10
Gratuity Payout = 0.576923 × $5,000.00 × 10 = $2,884.615 × 10 = $28,846.15
Result Summary:
The employee receives a lump-sum gratuity payout of $28,846.15 upon departure.
Frequently Asked Questions (FAQ)
What is the minimum service requirement to receive a gratuity payout?
Under standard statutory labor rules, an employee must complete a minimum of 5 years of continuous service with the same employer to become eligible for gratuity payouts. (The 5-year requirement is waived in cases of death or permanent disability).
Is gratuity income tax-free?
For government employees, gratuity payouts are 100% tax-exempt. For private sector employees covered under the Gratuity Act, statutory gratuity is tax-free up to prescribed tax exemption limits (e.g., $20,000 / ₹20 Lakh statutory caps).
Can an employer forfeit an employee’s gratuity payment?
An employer can forfeit or withhold gratuity payments only if the employee has been terminated for willful misconduct, violent behavior, theft, fraud, or causing intentional physical damage to company property.