The term “gratuity” refers to the additional payment that an employer provides to an employee in return for the employee’s labour. Nevertheless, the incentive is only offered to workers who have been employed by the firm for at least five years. The statute that addresses this is the Payment of Gratuity Act of 1972.
The gratuity can be paid out earlier than the typical five years if an employee is rendered unable to work due to an accident or sickness. Your most recent salary and the total number of years you worked for the firm are the two most important factors when determining your gratuity amount. In India, one can use a Gratuity Calculator Online to know their Gratuity amount.
Gratuity in India
An employer may sometimes provide a one-time payment to an employee as a gratuity. The money is provided to the worker as a token of gratitude for the job they have done for the company. Workers are provided with gratuities to assist them financially throughout their retirement years.
The Payment of Gratuity Act of 1972 lays forth the regulations regarding the provision of tips and their receipt. A worker must fulfil a number of prerequisites to qualify for a gratuity under this Act. It is required that the individual have worked continuously for the firm for at least five years. You can find Gratuity Calculator India to know more.
The qualifying period for gratuity begins before the 5-year milestone and continues for as long as the employee is alive or unable to work, whichever comes first. It is paid at the rate of 15 days’ wages for every completed year. The maximum amount that may be granted is Rs. 10 lakh. If there is anything left over, it will be considered a gift, also known as ex-gratia.
Eligibility Criteria for Gratuity
- You should be eligible for a pension when you retire.
- You should have retired.
- You should have worked at the same company for five years straight.
- You die or become sick or hurt due to an accident or illness.
How Gratuity is Calculated
To put it another way, how exactly Gratuity calculator online works? You can use the Gratuity Calculator India to determine the appropriate amount of money.
If you have worked for a company for at least five years and want to calculate your gratuity amount, use a gratuity calculator online. It is a useful method to estimate how much money you will get as gratuity when you leave the company.
You will have to enter the most recent salary amount received and the total time of your employment at your current company. Within a few short moments, the calculator would come up with the total gratuity amount.
Employees That Are Covered Under Payment Of Gratuity Act
The first category includes all workers who are qualified to receive gratuities following the Payment of Gratuity Act and who do not fall into any other categories. The computation that follows is the one that is used to determine the gratuity for these employees:
Gratuity = n*b*15/26
Where n = the tenure of service
b = the last drawn salary plus dearness allowance
If you have your most recent paycheck in hand, multiply that by 15 days and the number of years of service you’ve already put in. According to the Gratuity Act, this amount shouldn’t exceed Rs. 20 Lakhs. If it does, the excess will be considered as ex-gratia.
Take, for example, the case of Ms Smith, who has been an employee of XYZ Pvt. Ltd. for the past ten years. According to the information on her most recent pay stub, she made a total of Rs. 40,000 with the dearness allowance. Her gratuity amount will be:
10 × 40,000 × 15/26 = Rs. 2,30,769 approximately
The total amount of the gratuity she will receive will be 2,30,769 approximately after ten years of her service in the same company at a Rs. 40,000 salary.
For Employees Not Covered Under the Gratuity Act
It is essential to remember that the Gratuity Act does not prohibit employees from receiving gratuity even if they don’t fall under the provisions. Employers can provide gratuity even to those who are not covered under the Act. The formula to calculate gratuity for them is:
G = n*b *15/30
Instead of 26 days, here 30 days are taken into account.
Let’s still consider the above-mentioned example and assume Ms Smith is not covered under the Gratuity Act. We are considering the same parameters of her job which is ten years of employment at a salary of Rs. 40,000. In this case, her gratuity amount will be:
10 × 40,000 × 15/30 = Rs. 2,00,000
So, you see, with the same conditions of employment, you will still receive a gratuity, but lesser, if you are not covered under the Gratuity Act. You can use the gratuity calculator online for finding out your gratuity amount in both cases.
Using a Gratuity Calculator Online will help you understand how much you will get upon leaving. This is vital information that can help you plan better for the future. This is something that every working individual should check out. To learn more about Gratuity Calculator, you can contact Piramal Finance.