Gratuity Calculator

Under the Payment of Gratuity Act 1972 in India, an employer is required to pay gratuity to some employees. Are you eligible? And if so, how do you calculate how much your employer owes you? Read on to find all the answers and learn more about our gratuity calculator.

Gratuity calculator explained

Any employee who contributes to the Employees’ Provident Fund (EPF) is eligible to receive gratuity if they retire or resign after 5 continuous years of service in the organization. You must know how to calculate the amount due if your gratuity is due or if you want to make future financial plans based on the sum you will receive.

But, thankfully, you no longer need to know how to do the math yourself. Because our online gratuity calculator is here to help you. You simply need to enter your base salary and the dearness allowance amount, in addition to the years of service.

What is gratuity?

Gratuity is the lump sum amount an employer pays an employee as a token of appreciation for their service to the organization. An employee, however, has to work with the same employer for 5 continuous years or more to be eligible.

The employee will also receive gratuity in case of death, disability, or retrenchment-related layoffs. In such cases they will receive it irrespective of tenure of service.

The gratuity amount depends on the employee’s last drawn basic salary and their service period in the organization.

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 calculation involves the use of a formula. And doing it manually is not everyone’s cup of tea. Doing the math is dreadful enough. What’s worse is that the formula isn’t even universal. It is jurisdiction-specific. That’s why you need a gratuity calculator built for India—like the one above.

How to calculate gratuity

Calculating the gratuity due has never been this easy. All you have to do is just key your last drawn basic salary plus the dearness allowance in the calculator above.

However, should you wish to do the math on paper or a spreadsheet, use the gratuity formula below.

Gratuity calculation formula

The formula to calculate your gratuity amount is as follows:

Gratuity = n*b*15/26

In this equation:

n = The number of years of service 

b = Last drawn base salary + Dearness allowance

Here are the two points you must consider when doing the calculation:

• According to the Gratuity Act of 1972, the gratuity amount cannot be over ₹20 lakhs. Any excess amount will be considered ex-gratia.
• Since gratuity is paid for each year of service, the tenure will be rounded off to the nearest whole number in terms of years. That means if you have worked for 10 years and 7 months, you will receive gratuity for 11 years. But if you have worked for 10 years and 5 months, then gratuity will only be counted for 10 years.

So, for example, suppose you have been an employee at organization X for 15 years and 8 months and your last drawn base salary was ₹40,000. Also, let’s assume you did not receive any dearness allowance. The gratuity amount in this case will be calculated as follows:

Gratuity = 16*40000*15/26 = ₹3,69,230.77

How to use a gratuity calculator

Using the Lemonn gratuity calculator is very simple. Just follow the instructions below and you will have the amount in a few seconds.

• Put in your last drawn base salary + dearness allowance.
• Enter the accurate tenure.

The precise numbers are important as your gratuity amount calculation will depend on it. Make sure you calculate the tenure keeping the aforementioned rules in mind.

Benefits of using a gratuity calculator

Gratuity calculations depend on the formula above. A small mistake gave give you the wrong estimate. That’s why you should use a reliable gratuity calculator. Here are some of the benefits of doing so.

• Accurate calculations

If you have fed the correct values, a gratuity calculator guarantees accurate calculations. It, therefore, eliminates human error.

• Time saving

Gratuity calculations rely on a set formula and number work. They are time consuming as you have to ensure that the formula you’re using is suitable. Besides, you then have to put the formula via a calculator or a spreadsheet. Not so with the Lemonn gratuity calculator. Our calculator will thus save you plenty of time and energy.

• Financial planning

Assessing your gratuity amount will help you plan your finances better. And a gratuity calculator helps you calculate the expected gratuity amount well in advance, thus easing the financial planning process.

• Transparency

The gratuity calculator makes the calculation simple and thus easy to understand. It simplifies the estimation of the gratuity amount, thus enabling easy comparison and making calculations transparent and verifiable.

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.