Gratuity Calculator

Gratuity is a payment made to employees by the employers as a mark of appreciation for their continued service to the company. The gratuity payments are governed by the Gratuity Act 1972. Read on to check the gratuity eligibility criteria. And, if you are eligible for gratuity, use the CoinSwitch Gratuity Calculator to calculate the amount payable to you by your employer. Read on to learn more about this fantastic employee benefit scheme. 

More about the gratuity calculator

Any employee who contributes to the Employees Provident Fund (EPF) is eligible to receive gratuity after completing 5 years of continuous service in any organization. The gratuity due will be calculated on your last month’s basic salary plus the DA amount. 

A gratuity calculator will help you estimate the gratuity amount if you have worked for five years in an organization. Knowing the gratuity amount receivable can help you plan your financial future. 

The gratuity calculator above will simplify the gratuity calculation process for you. All you need to put in is your last month’s basic salary, the dearness allowance received by you, and the number of years of service.

Gratuity, explained

Gratuity is a one-time payout made by the employer to the employees who have put in five years of continuous service with the organization. It is a lump sum payment that an employee receives at the time of resignation or retirement. 

The only exceptions to the 5-year rule are when the employee passes away, develops a disability, or is laid off from the company. In such cases, employees or their nominee as the case may be, will receive gratuity irrespective of the tenure. 

What is a gratuity calculator?

A gratuity calculator is a tool that will crunch the numbers for you and estimate the accurate gratuity amount due.

The gratuity payout is specific to India, so the calculation formula is also tailor-made for the country. The Ministry of Labour provides the formula to calculate the gratuity amount.

Calculating gratuity

To calculate the gratuity amount, you will need basic pay for the last month of service, the dearness allowance received, and the number of years of service with the organization. 

You can calculate the gratuity amount payable to you at the click of a button once you plug in the variables. 

Formula to calculate gratuity

The receivable gratuity amount can also be calculated using the below-mentioned formula: 

Gratuity = n*b*15/26

Where:

n = The number of years of service 

b = Last drawn base salary + Dearness allowance

Here are two points you must consider when calculating the gratuity amount:

• The Gratuity Act 1972 states that the gratuity amount cannot exceed ₹20 lakhs. Therefore, any amount above ₹20 lakhs will be considered ex-gratia. 
• Gratuity will be paid for each year of service. The tenure will be rounded off to the nearest whole number. For example, if the service tenure is 11 years and 7 months, then the gratuity amount will be for 12 years.

For instance, Ms. A has been working with the same organization for 15 years and 5 months. She is planning to resign from her job at the end of the month. Her last drawn base salary is ₹40,000. She receives ₹20,000 as dearness allowance. The gratuity amount received by her will be calculated as follows: 

Gratuity = 15*(40000+20000)*15/26

  = ₹ 519231

Using a gratuity calculator

Calculating gratuity is easy with the CoinSwitch gratuity calculator. Follow the steps below to know your gratuity amount receivable by you: 

• Base salary 
• Dearness Allowance if any 
• The service tenure in the whole number 

The accuracy of numbers is important as even a small mistake can make a huge difference in the gratuity amount. 

How the gratuity calculator can help you?

Gratuity calculations are based on the formula above. But an effective, time-saving way to calculate gratuity is by using the gratuity calculator. Here are some of the benefits of using the gratuity calculator:  

• Correctness

An employee who contributes to the EPF and has served the same organization for five years or more continuously is eligible to receive a gratuity on retirement or cessation of employment with the firm. If you are eligible for gratuity, you can use the gratuity calculator above to compute the gratuity amount. All you will need is your base pay from your last drawn salary, your dearness allowance if applicable, and the number of years of service. 

• A time-saver

It is possible to calculate gratuity manually if you know the gratuity formula, but the process can be time-consuming. A gratuity calculator can provide you with the payout amount in seconds if you key in the variables correctly.

• Helps you plan your finances better

You will be eligible for gratuity if you have worked with a firm for more than 5 years in a row. The gratuity calculator will help you know the gratuity receivable if you plan to leave your job or are retiring. Knowing the exact receivable amount will help you plan your finances better. 

• Brings clarity

The gratuity calculator will calculate the exact gratuity amount for you. Thus, you can easily compare the amount mentioned against the payout you receive from your employer. And you can contact your employer in case of a discrepancy. 

Conclusion

An employee is entitled to receive a lump sum amount on retirement or while leaving the job after 5 years of service. This amount, called gratuity, is based on the employee’s last drawn basic salary plus dearness allowance. A gratuity calculator will help calculate the expected gratuity amount with ease, arming users to plan their financial future better.