Gratuity is an amount from an employer to an employee for their loyal service. To get this payment, you need to work for the company for at least 5 years. It’s a one-time lump sum payment. There’s even a law, called the Payment of Gratuity Act, that makes sure that employees receive gratuity. And if something happens to the employee, their family gets the payment instead. On that note, let’s find out what your gratuity amount will be with Rs 65,000 as your last-drawn salary after 6 years and 7 months of service.

Also read: What will be your gratuity for Rs 37,000 last-drawn salary after 6 years and 3 months of service?

What is gratuity?

Gratuity is money that an employer pays to an employee to recognize their long service. It is a financial safeguard for employees during their retirement period. To get this payment, you need to work for the company continuously for at least 5 years.

What should be length of service?

Employees are eligible for gratuity after completing 5 years of continuous service with the same employer, as per the Payment of Gratuity Act, 1972.

What are eligibility criteria for receiving gratuity?

To get gratuity, employees need:
1. 5 years of continuous service
2. Work in an organization covered by the Payment of Gratuity Act, 1972.

When are you eligible for gratuity?

You can get gratuity in the following situations:

• When you retire from your job
• If you quit after working for the same company for 5 years
• If you die or become disabled due to illness or accident while working
• When you’re eligible for superannuation (a type of retirement benefit)

What are organisational criteria for gratuity?

Organisations employing 10 or more individuals over the past years and following the Payment of Gratuity Act, 1972, are required to pay gratuity. 

How are service years counted for gratuity?

To get gratuity, you need 5 years of continuous service. Any service period of 6 months or more is counted as a full year.

What factors determine gratuity amount?

The number of years and the last-drawn basic salary of an employee are used to calculate the gratuity amount.

Can a company opt out of the payment of Gratuity Act?

If a company falls under the Payment of Gratuity Act of 1972, it cannot count itself out. 

Formula to calculate gratuity

(Last Drawn Salary x Number of Years of Service) X 15/26
Here, 15 refers to 15 days’ wages per year, and 26 refers to 30 days in a month, excluding Sundays.

What will be your gratuity on a Rs 65,000 basic salary for 6.7 years of service?

Let’s calculate gratuity for an employee with a basic salary of Rs 65,000, 6 years, and 7 months of service (rounded to 7 years).
Gratuity = (65,000 × 7 × 15) ÷ 26
Gratuity = Rs 2,62,500

(Disclaimer: Our calculations are projections and not investment advice. Do you own due diligence or consult an expert for financial planning)