GRATUITY CALCULATOR



What is Toolerz Gratuity Calculator?

Toolerz Gratuity Calculator is a free online tool designed to help employers and employees calculate the amount of gratuity payable to an employee at the end of their employment period.

Gratuity is a statutory benefit in India, governed by the Payment of Gratuity Act, of 1972.

The amount is paid at the time of retirement, resignation, or termination, provided the employee has completed at least five years of continuous service with the same employer.

The gratuity amount is calculated based on the employee's last drawn salary and the number of years of service.

How to Use Our Tool

Calculating gratuity manually is a tricky job, instead, you can use our free online gratuity calculator.

Follow the below steps to use our tool.

STEP 1: 

Enter our website's home page www.toolerz.com and search for Gratuity Calculator in the search bar.

Click on the dropdown and enter the page.

STEP 2: 

Enter the basic details like "Last salary drawn" and "no. of years worked" for that particular company.

Gratuity Calculator

STEP 3: 

Hit the calculate button to get the Gratuity amount.

Gratuity Calculator Formula

The formula for calculating gratuity under the Payment of Gratuity Act, of 1972, is as follows:

For employees covered under the Act:

Gratuity=Last Drawn Salaryx15/26xNumber of Years of Service

Where:

Last Drawn Salary = Basic Salary + Dearness Allowance (DA)

15/26 represents 15 days' salary for each year of service, with 26 working days in a month.

For employees not covered under the Act (those in the unorganized sector or certain other cases), the formula may vary, but a common approach is:

Gratuity=Last Drawn Salaryx1/2xNumber of Years of Service

Example

Let us understand thee gratuity calculator with an example.

Gratuity Calculation for a Private Employee

Assume an employee has worked for a private company for 10 years, with a last drawn monthly salary (Basic + DA) of ₹50,000.

Gratuity=50000x15/26x10

Gratuity=2,88,450

Gratuity Calculation for a Government Employee

Consider a government employee who has served for 15 years, with a last drawn monthly salary of ₹70,000.

Gratuity=70000x15/26x15

Gratuity=6,05,085

15/26 Rule in Gratuity Calculation

The 15/26 rule is a critical component of the gratuity calculation formula under the Payment of Gratuity Act, of 1972.

It essentially means that an employee is entitled to 15 days' salary for each completed year of service, with a month considered to have 26 working days (30 days - 4 Sundays).

This rule ensures a fair calculation of the gratuity amount, taking into account the number of working days typically considered in a month.

Dos and Don'ts of Gratuity Calculation

Dos

1. Do ensure accurate input of the last drawn salary: Include only the basic salary and dearness allowance.

2. Do verify the total years of service: Round off to the nearest full year if needed.

3. Do check for any specific employer policies: Some companies might have additional rules.

4. Do keep track of changes in the Payment of Gratuity Act: Ensure compliance with the latest legal requirements.

Don'ts

1. Don't include allowances other than DA: Housing allowance, travel allowance, etc., which should not be included in the last drawn salary.

2. Don't calculate for less than five years of service: The minimum requirement is five years of continuous service.

3. Don't ignore partial years: If the service period includes more than six months, round it up to the next year.

4. Don't use outdated calculators: Ensure the calculator is up-to-date with current laws.

Gratuity Calculator in Excel

Creating a gratuity calculator in Excel is a practical approach for HR departments and individuals. Here’s a step-by-step guide:

1. Open Excel and Create a New Worksheet.

2. Label the Columns: Enter labels such as "Last Drawn Salary", "Years of Service", and "Gratuity Amount".

3. Input Formula: In the Gratuity Amount column, input the formula based on the 15/26 rule. =B2x(15/26)xC2= B2 x (15/26) x C2 Where B2 is the cell with the last drawn salary, and C2 is the cell with the years of service.

Calculation: Excel will automatically compute the gratuity amount based on the input values.

Eligibility Criteria for Gratuity

Minimum Service: An employee must have completed at least five years of continuous service with the same employer.

Types of Employees: Both private and government employees are eligible, provided they meet the minimum service requirement.

Conditions for Payment: Gratuity is paid upon retirement, resignation, termination, death, or disablement due to an accident or disease.