Gratuity is a lump sum payment made by an employer to an employee as a token of appreciation for their services. The gratuity amount is calculated using the following formula:
- Gratuity = Last drawn salary x (15/26) x Number of years of service
Here are some things to keep in mind when calculating gratuity:
- The last drawn salary should include the basic salary, dearness allowance, and commission received on sales.
- The number of working days per month is assumed to be 26 days.
- If the organization is not covered under the Act, the number of working days in a month changes to 30 days.
- Months more than five are rounded off to the following year.
- If you receive incentives for the sales target you achieve, they add up to your total income.
You can use an online gratuity calculator to determine the gratuity amount.