A gratuity calculator is a tool that gives you an estimate of the amount that you would receive, on quitting the job, after rendering continuous service of five years. It is a handy tool to calculate the gratuity on retirement from the company.
Online Gratuity Calculator
Gratuity is the amount paid to the employee by the employer for the graceful service of the employee in the establishment. It is paid by the employer to the employee who is working in the establishment for more than 5 years. In India, the Gratuity Act was passed in the year 1972 which provided various rules and guidance of implementing the Gratuity Act all over the country to the workers of various sectors.
The Act applies to every establishment including 1. Every factory, establishment, mine, oilfield, plantation, port and railway company or shop. 2. Every shop or establishment within the meaning of any law for the time being in force in relation to shops and establishments in a state in which 10 or more persons are employed, or were employed, on any day of the preceding 12 months. 3. The act, however, continues to apply even if the number of employees goes below 10 at any time.
As of now there is no registration for Gratuity. For every establishment within 30 days of incorporation, there is a Notice of opening in Form - A, which needs to be filled for applying for the Payment of Gratuity Act to be submitted to the controlling authority of the Gratuity Act. Then after 5 years of continuous service of any employee, it becomes a statutory obligation of the company to pay gratuity amount at the time of separation from services.
1. Retires from services, 2. Resigns after working for 5 years(4 year and 240 days) with a single employer, 3. Death during service period, 4. Discontinue from services who suffers disability due to illness or accident. 5. Retrenchment or layoff
Employee needs to complete at least 5 years of service to be eligible for payment of gratuity. However, according to a ruling of Madras High Court, an employee is eligible for gratuity in case he completes 240 days of service in the fifth year of service.
If an employee dies during his employment, his legal heir will be eligible for gratuity even if he has not complete 5 years of service.
Gratuity calculation is dependent on the total number of years served in the company and the last drawn salary.
15 days of salary (last drawn salary X 15/26) X years of service Salary = Basic + Dearness allowance
Usually gratuity should be paid along with FnF settlement if employer doesn't hold any gratuity fund account with LIC.
If employer maintain Gratuity fund account with LIC, then for those applicable employee, issue cheque against this account in favour employees.
As per the government mandate, the employer should pay the gratuity within 30 days from the date of full and final settlement of the employee. In case of any delay in payment, the employer is liable to pay simple interest on the gratuity from the due date until the date when payment is made.
There is an option with the employer either to open an account with LIC of India (LIC’s New Group Gratuity Cash Accumulation Plan). With this plan, the employer can meet the obligation of statutory gratuity benefits for their employees. Here the contributions are paid by the policyholder(Employer) every year to secure the gratuity benefit in order to provide life cover benefit, according to the rules of the policy. In this case, a single account is maintained for all(Employee's) the contributions made by the policyholder based on Actuarial valuation. or, As per Accounting Standard, a Gratuity amount Provision as of March 31, (Year-end) needs to be accounted for based on an Actuarial valuation done by Actuaries. Here the employer is required to provide basic information on employee data required for computing the Actuarial valuation. Based on the Actuarial valuation report, the employer needs to account for Provision in the Books of accounts every year.
Gratuity exemption is up to Rs.20 Lacs Gratuity actually received by the employee, or Half month’s salary for every year of service that the employee has completed with the employer.
1. The employer must submit a Notice in 'Form A’ to the Controlling Authority of the area within 30 days start of business. 2. The employer must submit a Notice in 'Form B’ to the Controlling Authority of the area within 30 days of any change in the company name, address, or nature of business. 3. A female employee willing to exclude her husband from family for the purposes of the Gratuity, then she should file a Notice in 'Form D' and send in triplicate to the employer. 4. Every employee who joined service is required to make a nomination. There can be more than one nominee that should be filled in 'Form F'. Nominees may be changed at any time by the employee, by giving written notice to the employer in 'Form H'. 5. Abstracts of the Gratuity Act, 1972 should be displayed in English and in the language understood by the majority at a conspicuous place at or near the main entrance of the establishment.
IF employer fails to pay gratuity fund, he shall be guilty and will be punishable with a fine which may extend to ₹10,000. In case of a continuing offense with a further fine which may extend to ₹1,000 per day. If Employer avoids such a payment by false representation or false statements shall be punished with imprisonment for a term which may extend up to 6 months, or with fine which may extend up to ₹10,000, or both. If an employer makes default in complying with the provisions of the act shall be liable to imprisonment for a term which may extend to 1 year and shall not be less than 3 months with a fine which may extend up to ₹20,000 (minimum amount - ₹10,000) or both.
Employer should discuss this matter with regards to transfers and come up with a policy on this. Employees should ask for a written declaration from the employer towards the transfer of employer liability which should cover Gratuity service transfer.
1. When a new employee is hired, allocate gratuity cost under CTC. This will help in assessing employer costing. 2. The percentage for Gratuity allocation should be 4.81% of Basic + Dearness Allowance. 3. For yearly valuation of gratuity, HR should provide accurate information to Actuaries. 4. When any appraisal happens, the Gratuity amount allocated under CTC should be revised based on the revised Basic + Dearness allowance.