Gratuity Rules: How many years is it necessary to work to get gratuity? How is it calculated?

Apart from salary and PF, companies and government departments also give gratuities to the employees. Gratuity is a reward given to an employee by the company. To receive gratuity the employee has to fulfill certain conditions. A small part of gratuity is deducted from the employee's salary, but the company pays the major part. An employee can get the benefit of gratuity even after changing jobs, retirement, or leaving the job due to any reason, provided he fulfills the conditions.

Many people believe that companies give gratuity only when a person works at the same place for 5 years or more. But, in reality, it is not so. According to law, working continuously for five years in the same company is not necessary to get a gratuity. If an employee has worked continuously for 4 years 240 days in the same organization then he will be entitled to gratuity. Under the Payment of Gratuity Act, of 1972, this benefit is available to every employee of a company where more than 10 people work.

There is no time limit after death
If an employee dies while on the job, there is no limit on the period for calculating his gratuity. This means that no matter how many days such an employee has spent in his service, he will be considered fully entitled to receive gratuity. For those working in coal or other mines or in underground projects, the tenure of 5 years is considered only after completing 4 years and 190 days. According to the law, such employees working below the ground will be considered entitled to gratuity only after 4 years and 190 days.

This is how gratuity is calculated
There is a formula to calculate gratuity. Total gratuity amount = (final salary) x (15/26) x (number of years worked in the company). Suppose an employee has worked in the same company for 20 years. The final salary of that employee is Rs 50000. Here only 26 days are counted in the month because it is believed that there are 4 days of holidays. Gratuity is calculated on the basis of 15 days in a year.
Total gratuity amount = (50000) x (15/26) x (20) = Rs 576,923.
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