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How to calculate salary in case of gratuity payment

Pravesh Kumar (Still Learning) (163 Points)

14 December 2011

As per my knowledge Gratuity calculation formula is :

Salary x 15 / 26 x no. of years worked

I just wanted to know as per law how to calculate

1) Salary --- (Wheather it is last drawn salary or average of last 10 month salary or something else)

2) No. of Years worked (Suppose a person worked for 4 years 11 months his applicability can we say this is 5 Years or suppose a person worked for 5 years 3 months can we say this is 6 years like this how to roundoff the years of service)

Please reply

Thanks

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5 Replies

CS RAJESH C.CHOUDHARY (ASSISTANT MANAGER) (14607 Points)
Replied 14 December 2011

The formula is ...

15/26* last drawn salary * completed years of service or part thereof in excess of 6 months

where salary = basic salary+ DA (whether forming part or not)

and that too is true only if the employee is covered under payment of gratuity act

if the employee isnt covered under payment of gratuity act

then the calculation is

1/2* Average monthly Salary * Completed Years of Service

Salary = Basic Salary + DA (if terms so provide) + Commission (based on fixed %tage of t/o)

Average Monthly Salary= average salary of last 10 months immediately preceeding the month of retirement....

i hope now its a bit clear to u

moreover the period of service once is qualified i.e. 5 years of continuous service doesnt make any changes in calculation of exempted gratuity

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Pravesh Kumar (Still Learning) (163 Points)
Replied 14 December 2011

thanks for your reply can you please tell me how to know that or i mean how to know that which company comes under covered under payment of gratuity act

Thanks

Shalaka Chawla (-) (44 Points)
Replied 14 December 2011

If covered under gratuity act- 10 months immediately preceeding the DATE of retirement.

If not under Gratuity Act- 10 months immediately preceeding the MONTH of retirement.

1 Like

Pravesh Kumar (Still Learning) (163 Points)
Replied 14 December 2011

I have two question

1) how to know that it comes under gratuity act or not

2) if under gratuity act (current salary or 10 months immediately preceeding the DATE of retirement)

or if not under gratuity act ( average of 10 months from month of retirement)

Please clear my doubts

Balaganesan Panchanathan (3 Points)
Replied 21 February 2023

HI all, GM, in my organisation, in salary payment, grade pay is also paid as per pay scale (Grade pay+pay+DA+HRA+OA). Should we add this grade pay amount while calculating basic pay for gratuity workings. Because for calculating DA & HRA basic pay is arrived by adding Grade pay and Pay. Request to clear my doubt.