How the gratuity works?
Every year, the company set aside some part of your salary and after completing more than 5 years, the same will be served as Gratuity.
Who are eligible for Gratuity?
The basic eligibility of the employee is, who have completed 5 years within the same organization.
There is no gratuity, if served for less than 5 years.
How to calculate your gratuity?
For Govt Employees:
(15 * last basic salary withdrawn(including DA) * no of years experience)/26
For Private Employees:
(15 * Avg basic salary of last 10 months) * no of years of experience)/30
Suppose, if your basic is 43,000 and having 8 years of experience, with the same company
= (15*43,000*8)/26
= 1.98 L
What is the max amount you can receive on gratuity?
20 lakhs
When can we claim for gratuity?
Post resignation or termination from company only.
Other cases to withdraw gratuity?
If the employee has expired(nominee can claim)
Within how many days, company need to pay your gratuity?
30 days after resigned/terminated
What should I do, If the company denies my gratuity?
You can lodge a complaint at labour court.
I have completed 4 years 4 months with the same company. Am I eligible for Gratuity?
Some company does, some doesn't.
As per the gratuity rules, if the employee serves 240 days in the last serving year, he is eligible for Gratuity.
I have completed 4 years 8 months, am I eligible for gratuity?
Yes.
If I complete, 6 years 3 months, whether I should calculate my gratuity for 6 years or 7 years?
The months will be rounded to the nearest sixth month.
6 years 3 months equivalent to 6 years
6 years 8 months equivalent to 7 years
6 years 6 months equivalent to 7 years
If I resigned in the mid of 6 month?
No of years will be taken for the completed months only.
6 years 5 months 15 days = 6 years 5 months
Why it has multiplied with 15 and divided by 26?
15 - min no of wages provided
26 - no of working days
I am a temporary employee(pay slip from consultant) for first 1 year and completed four years after permanent? Am I eligible for gratuity?
Nope. You should serve with the same payslip.
I switch companies often, how to withdraw gratuity?
Unless you serve the same company for more than 5 years, you are not eligible for gratuity.
So, you are losing your gratuity amount if switching companies very often.
In case if the employee expired before serving 5 years, whether he is eligible for gratuity?
Yes, if he serves more than a month.
This is the only exceptional case without serving 5 years
Shall I recieve two gratuities since I completed 5 years in two companies(individually)?
Yes.
Is gratuity taxable?
Yes
Who benefit most for the Gratuity?
If the company provides a high basic salary, it will benefit more to the employee.
So, it is best to choose a company with high basic salary
Hope, this is the reason variable pay has been introduced and there is cut in the basic pay.
Basic pay will not only affect the gratuity, it also changes the amount of HRA, yearly hikes etc.,
What is the best advice for the gratuity?
If you are working in a small company with a high basic pay, complete at least 5 years in the same company to recieve benefits.
What if the company goes bankruptcy?
Even though the company is not able to run or shut down, the employer should pay the gratuity for the eligible employees.
What is the final take from gratuity?
A suggestion from Littlesavings
The gratuity amount will help you as an Emergency Fund.
Excluding gratuity, you can save the remaining amount for Emergency.
If your target is to save emergency funds for 6 months and monthly expenses is 50K(including EMI's), the total amount should save for Emergency is 3 L.
Out of which, some amount(2L) in the above case, can utilise as an Emergency Fund in case of job loss.
And apart from that, this amount can be utilised as an investment too, if you have any plans for a own start up company.
Post any queries regarding Gratuity in the comments section.
