Gratuity Rules in India: Eligibility, Calculation, and Slabs
By Surya Prakash
Financial Analyst & Editor
What is Gratuity?
Gratuity is a statutory lump-sum benefit paid by an employer to an employee for services rendered, usually upon retirement, resignation, or termination. Establishments with 10 or more employees are legally required to offer gratuity under the Payment of Gratuity Act, 1972.
Eligibility Criteria
To qualify for gratuity, an employee must have completed at least 5 years of continuous service with the same employer. However, this 5-year requirement is waived in case of the employee's death or disablement during service.
The Gratuity Calculation Formula
The formula for calculating gratuity is: Gratuity = (15 * Last Drawn Salary * Years of Service) / 26. Last drawn salary includes basic salary plus dearness allowance (DA), and 26 represents working days in a month.