Things about Gratuity Every Employee Must Know

There are many schemes that you should know to stay financially informed. Now, have you ever heard about the word gratuity? Well, it is the benefit that is experienced by an employee for the services he or she has rendered to a business or an organisation.

In other words, a Gratuity is a shape of gratitude paid by the employer to the employee for his or her services and commitment towards business. And if you don’t know how to calculate it and more then you can always count on a good gratuity calculator to do the maths for you. But remember there are certain general things that you should know about gratuity  and this post will unfold them for you. Keep on reading to stay informed:

Know about the eligibility

A gratuitous payment is the one that gets made by the employer in case of constant service of five years or more. Most of the times , this payment is made at the moment of retirement but alterations can be made to the same under special type of circumstances such as employee resignation or even death.

The Gratuity payment gets governed by the Gratuity Act, 1972. And as per this act, plantations, railway companies, ports, factories, mines, oilfields and other types of establishments that have ten or even more employees, are demanded to make gratuity payment towards their working staff and employees’ services.

Also, there are certain other important thing that go unknotted are that once employee strength of any organisation grows to ten or more, then the employees of that specific business or organisation are automatically eligible for gratuity payment even if the strength drops below ten in following years. So, if you are also working in a company, be mindful about this.

Gratuity versus Provident Fund

Well, gratuity is entirely different from Provident Fund. Contrary to the Provident fund, the employee does not need to make an equal contribution to gratuity payment. Even though both include payment of a lump sum amount at the end of the overall employment, EPF acts as a contribution plan and that of gratuity works a benefit plan . Remember that gratuity is an after-job perk that an employee attains. Similarly, you know gratuity payment does not have a set percentage and is grounded on the last drawn salary as well as the overall years of service.  So, once you know about these things, you can be sure that your employer or anyone does not fool you with anything.

Calculate your gratuity

To calculate your overall gratuity payment, you can apply the formula such as:

  • Your Last drawn salary (basic salary plus overall dearness allowance) the number of completed years of service

Not to miss that as per this kind of formula, the time period over six months or even more is considered as one complete year. For example, in case you have worked for six years and seven months, then your month of service in the formula is going to be seven years. If it is somewhat less than six months, just assume six years and five months, then for the overall calculation service tenure is going to be taken as six years.


So, you can get a gratuity calculator at 5paisa platform and ensure that you count your gratuity  right away. After all, it feels good to know that right?

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