How Calculation of Gratuity

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.