Friday, March 5, 2010

Gratuity Calculation: Government increase gratuity to Rs. 1million

There is good news for the Indian private sector workers. On March 4, 2010, the union cabinet amended the gratuity act and increased the amount of gratuity given to the private sector employees from Rs.3,50,000 to Rs.1 million. The proposal had been cleared in the cabinet meeting presided by Prime Minister Manmohan Singh. The amendment bill will now go to Parliament and be presented at the current budget session. With this new decision, now private sector employees would get equal amount of gratuity like government employees. The tax free gratuity of the central government employees had been raised by the sixth pay commission.

Every working person who has completed five years in government or private service is eligible for half a month’s salary as gratuity for every year completed in the service. Every employer with “more than ten salaried workers” is mandated to provide gratuity to eligible employees but many private sector employers do not have their gratuity liabilities adequately funded. From now on, the listed companies would have to disclose their gratuity liability.

This is a very good decision taken by the Indian government. If you want to calculate your gratuity here is the formula:

1. basic/26 x 15 days x number of years of service


2. BASIC + DA (Last Pay drawn) X 15 /26 X No. OF YEARS WORKS

Gratuity is to be paid to any employee only he provides service for a minimum time of five years at a stretch with his employer in company. The Gratuity calculation is done as per the last average remuneration drawn and time in years served by an employee.

If you are still having problem then visit this link:

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