🎁Gratuity calculator

How is gratuity calculated?

Gratuity is a lump sum your employer pays when you leave after long service. For every completed year of service the law gives fifteen days’ wages, worked out from the wages you were last paid. For a monthly salary, fifteen days’ wages is the monthly wages divided by 26 and multiplied by 15.

Since the Code on Social Security came into force on 21 November 2025, wages for gratuity follow the Code’s definition: basic pay and dearness allowance, but never less than half of your total pay. That is why a salary with a small basic and large allowances gives a larger gratuity than it used to.

A part of a year longer than six months counts as a full year. The most that can be paid is the amount notified by the Central Government, which the Labour Ministry says is currently 20 lakh.

What is the formula for gratuity?

• Gratuity = wages ÷ 26 × 15 × years of service, up to the ₹20 lakh maximum
• Years of service = completed years, plus one more if the part-year is more than 6 months
• Wages = basic pay + dearness allowance (+ retaining allowance), but at least half of the total monthly pay
• Retirement, resignation or superannuation needs 5 years of continuous service; death and disablement do not

Can you show a worked example of gratuity?

Wages of ₹60,000 a month and 10 years of service: fifteen days’ wages = 60,000 ÷ 26 × 15 = ₹34,615, so gratuity = 34,615 × 10 = ₹3,46,154. If basic pay were only ₹30,000 of a ₹1,00,000 monthly pay, half of the total, ₹50,000, would be used as wages: 50,000 ÷ 26 × 15 × 10 = ₹2,88,462. For 7 years 7 months, 8 years are counted; for 7 years 6 months, 7.