Gratuity is a collectable amount for an employee, paid as a gratitude by the organization. An individual who has worked in an organization for a minimum period of 5 years is eligible for gratuity. It is also known as the end of service benefits. Gratuity calculation is based on his/her average salary, dearness allowance and number of years he / she worked in the organization.
Here is some simple example to learn the gratuity calculation (India), based on Basic pay , D.A and year of service.
Calculate the gratuity amount for the basic pay of Rs.25000 and D.A Rs.2000 with 10 years of service.
Gratuity calculation can be calculated using the formula :
Gratuity Calculation= [ (Basic Pay + D.A) x 15 days x No. of years of service ] / 26
Basic Pay = 25000
D.A = 2000
Year of Service = 10
Substitute the values in the formula,
Gratuity = ((25000 + 2000) * 15 * 10 ) / 26
= ( 27000 * 150 ) / 26
Hence, the Gratuity amount is Rs.155769.230