The gratuity formula
Gratuity = last drawn wages × 15 ÷ 26 × years of service. More than six months in the last year counts as a full year. Wages are basic plus DA (and, under the Labour Codes, allowances above half of pay).
Eligibility: five years of continuous service (4 years and 240 days is commonly treated as five), one year for fixed-term employees, and no minimum on death or disablement. The maximum is ₹20 lakh. Gratuity rules in detail.
Frequently asked questions
How is gratuity calculated?
Last drawn monthly wages × 15 ÷ 26 × completed years of service, counting more than six months as a year, up to ₹20 lakh.
Is gratuity paid before 5 years?
Only to fixed-term employees after one year, on death or disablement, or where 4 years and 240 days is treated as five.