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All-in-one HR platform · v2.0
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All-in-one HR platform · v2.0
14-day free trial · No credit cardhello@HrMagix.com
A statutory payment on separation to employees who have completed five years of continuous service, calculated as fifteen days' wages for each completed year on the last drawn basic, using a twenty-six day divisor. The five-year condition does not apply in the case of death or disablement.
Payroll handles gratuity twice. Each month, finance sets aside a provision for it, typically 15/26 of monthly basic and DA over 12 months, about 4.81%. At exit, HR checks eligibility under the Payment of Gratuity Act 1972: at least five years of continuous service, with exceptions such as death or disablement.
Example with illustrative figures: an employee leaving after 7 years and 8 months on last drawn basic and DA of ₹40,000 is credited with 8 years, because the part year exceeds six months. Gratuity is ₹40,000 × 15 ÷ 26 × 8, about ₹1,84,615, within the ₹20,00,000 statutory ceiling.
Under the Code on Social Security, in force since 21 November 2025, fixed-term employees qualify after one year, pro rata, and allowances above 50% of total pay are added back to the wage used. Check the current position before settlement. The usual error is counting the part year wrongly or using gross instead of basic plus DA.
A statutory payment on separation to employees who have completed five years of continuous service.
Fifteen days' wages for each completed year of service, on the last drawn basic, using a twenty-six day divisor.
Five years of continuous service.
Yes. The five-year condition does not apply in the case of death or disablement.
The last drawn basic, together with dearness allowance where it is paid.
It is the divisor the statutory formula uses to arrive at fifteen days' wages.
Yes, where the qualifying service is complete.
The gratuity calculator applies the statutory formula to your own figures.
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