Gratuity for employers
Gratuity for employers
Gratuity basics: when it is due, the 15/26 formula, fixed-term employees under the labour codes and the ₹20 lakh tax-free limit.
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15/26Days of wages for each year of service
5 yearsContinuous service needed (1 year for fixed-term)
₹20 lakhTax-free limit for private employees
When it is due
Gratuity is paid when an employee leaves after at least five years of continuous service, and on death or disablement regardless of service. Under the Code on Social Security, fixed-term employees qualify after one year.
How to calculate it
Last drawn wages (basic pay plus DA) × 15 ÷ 26 × completed years of service. A part year of more than six months counts as a full year.
What employers do
- Pay within 30 days of it becoming due.
- Keep a provision or a group gratuity policy so the cash is ready.
- Show the calculation in the full and final settlement.
Free tools for this
Do it in USR One. USR HRMS runs leave and attendance, and USR Payroll (add-on, India, by invitation) handles PF, ESI, PT, LWF and TDS on salary on the same employee record. Payroll software · USR HRMS