Gratuity Calculator

Gratuity Calculator

A gratuity calculator can assist you in determining the amount of gratuity you're entitled to receive. This estimation can aid in planning your financial goals, such as retirement or funding significant expenses, well in advance. Calculating the gratuity amount manually can be an arduous task; therefore, employing an online gratuity calculator to estimate this sum provides a more straightforward solution.

An employer utilizes a standard gratuity formula to calculate an individual's gratuity, taking into account various factors such as years of service and the most recent salary. It is important to recognize that the gratuity amount differs from one individual to another due to the differing pay scales of each employee. The Investkraft Gratuity Calculator provides a comprehensive calculation of the gratuity amount in a matter of seconds.

How Does Gratuity Work?

Gratuity is the sum paid by an employer to an employee as a gesture of gratitude for the services rendered to the company. However, this benefit is exclusively available to employees who have been with the company for five years or more. The Payment of Gratuity Act of 1972 governs this provision.

An employee may become eligible for gratuity before completing five years of service if they become disabled due to an accident or disease. Gratuity is primarily calculated based on the employee's last drawn salary and the number of years they have served the company.

We will now understand how gratuity works by discussing the gratuity calculator formula and an example.

Gratuity Calculator Formula

Gratuity = n*b*15 / 26

Where,

n = Tenure of service completed in the company

b = Last drawn basic salary + dearness allowance

Suppose Vedanshi has worked with a company for 6 years and her last drawn salary along with the dearness allowance is 50,000 rupees. Putting these values into the formula mentioned above;

Gratuity = 6*50000*15/26

Gratuity = INR 173076/-

How to Use the Gratuity Calculator?

You can easily calculate the gratuity amount your company owes you (after completing 5 years in the same company) with the help of the gratuity calculator from Investkraft. You just have to follow these simple steps:

1. Enter your monthly salary (which includes both the basic and dearness allowance components)
2. Enter the number of years you have been working in your current company
3. Click on the “Invest Now” button

What are the Benefits of Gratuity?

Gratuity, typically referring to a monetary reward or payment given to employees by their employers, especially upon leaving a job after a certain period of service, offers several benefits:

• Financial Security: Gratuity serves as a form of financial security for employees, particularly upon retirement or departure from a company after long-term service. It provides an additional lump sum payment beyond regular salary and benefits.
• Recognition of Service: Offering gratuity recognizes and appreciates the dedication and loyalty of employees who have served the company for a significant period. It acknowledges their contribution to the organization's success.
• Employee Motivation and Loyalty: Knowing that they will receive gratuity encourages employees to remain loyal and committed to their jobs and the organization. It can serve as an incentive for employees to stay with the company for an extended period.
• Retention Tool: Gratuity can be used as a tool for retaining talented employees. Knowing that they will receive a significant payout upon leaving can make employees think twice before resigning, thus reducing turnover rates.
• Legal Requirement/Compliance: In many countries, gratuity is mandated by law, especially for employees in certain sectors or after completing a certain period of service. Employers need to comply with these legal requirements to avoid penalties or legal issues.
• Tax Benefits: In some jurisdictions, gratuity payments enjoy tax benefits, either for the employer, the employee, or both. This can make it a more attractive form of compensation for both parties.
• Enhances Employer Brand: Offering gratuity as part of the compensation package can enhance the employer's brand and reputation. It portrays the company as one that values its employees and rewards their loyalty and dedication.
• Peace of Mind: For employees, knowing that they will receive a gratuity payment upon leaving the company can provide peace of mind and a sense of financial stability, especially during times of economic uncertainty.