Want to know how much gratuity will be received on leaving the job or retirement? You can easily calculate it with this formula.
People working in both private and government sectors are entitled to gratuity. In a way, it is a reward given by the employer to the employee in return for working for a long time.
But, there are some terms and conditions for this. The Payment of Gratuity Act, 1972 applies to gratuity. Private sector companies have to pay gratuity to employees who fulfill the conditions according to this Act. The lump sum amount received under gratuity is very useful. Its importance increases further in the event of retirement.
What is the condition to be entitled to gratuity?
The first condition to be entitled to gratuity is that you should have completed at least five years of service in a company. This means that if a person resigns from the job before completing 5 years, he will not get gratuity. Gratuity payment is also included in the cost-to-company (CTC) of many private companies. But, this money is given to the employee only when his job is at least five years. If he leaves the job before this, the entire gratuity money is lost.
Even in these situations, the employee is entitled to gratuity.
However, if the company terminates the employee from the job and the reason for this is not the fault of the employee, then he is entitled to gratuity payment. Apart from this, if an employee voluntarily retires from the company before the stipulated time, then also he will get a gratuity. The gratuity amount is also paid in the case of death or disability of the employee. In case of retirement, the company gives the entire amount of gratuity to the employee.
You can invest Rs 100 daily in LIC Mutual Fund scheme through SIP.
What is the formula for calculating gratuity?
There is a formula for calculating gratuity amount. If an employee wants to know how much gratuity money he will get on resigning from the job or on retirement, then he can easily calculate the gratuity amount with this formula.
Gratuity amount = (15X last salary X years of service)/26
The final salary includes basic salary and dearness allowance (DA). If an employee has worked for six months or more, then it is counted as one year. We can easily understand this with the help of an example. Suppose Sujata has worked in an IT company for 11 years and 7 months. In such a situation, her job will be considered as a full 12 years. We assume Sujata's final salary (basic plus DA) to be Rs 50,000. Thus, she will get Rs 3,46,153 as gratuity (gratuity amount =(15X50000X12)/26).
