The benefit of gratuity is given to the employee after working continuously for 5 years in any company. These benefits are given by the company as a reward to the employee for serving continuously for 5 years.
Gratuity to employees is a benefit given on retirement under the Gratuity Act, under the Payment of Gratuity Act, 1972, any company employing more than 10 employees has to give the benefit of gratuity to its employees.
How is Gratuity calculated?
Gratuity amount is calculated on the basis of 15 days salary of the last month. Its formula is Gratuity = (n*b*15)/26. Here n stands for years, the number of years the employee has worked in the company. b means the last drawn salary of the employee, which includes DA and commission.
Important things related to gratuity
- If any company has 10 or more employees, then it has to give the benefit of gratuity to its employees. Along with companies, this rule also applies to shops, showrooms, factories and mines.
- The benefit of gratuity is given even after working for five years in a company . Even if you have worked for 4 years and 8 months in a company, you will be entitled to gratuity.
- Your notice period is also counted as working days. For this reason the notice period is counted for gratuity.
- A maximum of Rs 20 lakh gratuity is given to any employee and the amount received in this is also tax free.
- Gratuity is also given to the employees of private companies along with the government.
- If the employee dies while working in the company, then the nominee gets the amount of gratuity. The 5 year rule does not apply here.