Gratuity is the amount paid by an employer to the employee for the services rendered by him/her during the period of employment. Gratuity can only be given when the employee completes a minimum of five years of service with an organization. As per the Payment of Gratuity Act 1972, Gratuity should not exceed an amount of 20 Lakhs and the act has categorized non-government employees into two categories;
Employees covered under the act
Gratuity calculation formula: 15 * last drawn salary * tenure of working / 26
Employees not covered under the act
Gratuity calculation formula: 15* last drawn salary * tenure of working / 30