1. Recognition: It is a token of appreciation for the employee's hard work and loyalty over the years.
2. Financial Security: It helps employees with financial support as they transition out of a job, particularly in retirement.
3. Retention Tool: Gratuity encourages employees to stay longer with an organization to become eligible for the benefit.
1. Statutory Gratuity: Governed by labor laws like the Payment of Gratuity Act, 1972 in India, this is mandatory for employers meeting specific criteria. (Ref : Min of Labour & Employment )
2. Non-Statutory Gratuity: Employers may voluntarily provide gratuity benefits beyond legal requirements as part of company policy.
• They have completed 5+ years of continuous service (exceptions may apply in cases like death or disability).
• They work in an organization with 10 or more employees (in India, this is per the Payment of Gratuity Act).
• Last Drawn Salary: Includes basic salary and dearness allowance.
• Years of Service: Total completed years (rounding up if service exceeds 6 months).
• 15/26: Reflects 15 days of salary for every completed year of service, based on a 26-day working month.
• Tax Exemption: In India, gratuity is tax-exempt up to ₹20,00,000 under Section 10(10) of the Income Tax Act, 1961 for employees covered by the Act.
• Amounts beyond the exemption limit are taxable as per the individual’s income tax slab.
1. Death or Disability: If an employee passes away or becomes permanently disabled, the minimum service requirement (5 years) is waived.
2. Voluntary Retirement Scheme (VRS): Gratuity may also be paid under VRS policies.
• Encourages long-term employment.
• Provides a financial safety net at the end of service.
• Helps in retirement planning.
1. Last Drawn Salary: Includes basic salary and dearness allowance.
2. Years of Service: The total duration of employment in the organization.
3. Organization Type: Whether the employer falls under gratuity laws (like the Payment of Gratuity Act, 1972 in India).
4. Other Factors: Certain calculators may ask for additional information, like partial years of service or tax exemptions.
Using these inputs, the tool applies the gratuity formula:1. User-Friendly Interface: Simple design to ensure easy use for all.
2. Accurate Calculations: Follows statutory laws and guidelines.
3. Customizable Options: Accounts for exceptions like death, disability, or voluntary retirement.
4. Tax Details: Provides insights into tax exemptions and liabilities.
5. Instant Results: Eliminates delays in manual calculations.
1. Saves Time: Quick and efficient, providing results within seconds.
2. Ensures Accuracy: Reduces errors compared to manual calculations.
3. Simplifies Processes: No need to remember formulas or statutory details.
4. Helps in Financial Planning: Employees can plan their retirement or transition finances effectively.
5. Transparency: Employers can provide clear and accurate breakdowns of gratuity amounts.
