Gratuity calculator: the 15/26 formula
Last drawn salary and years of service in: statutory gratuity estimate out, with the eligibility rule and the rounding convention applied exactly as the formula does.
Your inputs
Your estimate
The Act's ceiling is ₹20 lakh for private-sector employees (higher limits apply to central government employees; verify the current caps for your case). Employers may pay above the formula voluntarily; tax treatment has its own limits. Formula per the Payment of Gratuity Act via labour.gov.in.
How the formula works
Statutory gratuity is last drawn wages × 15/26 × completed years of service — fifteen days of pay for every year, with a month counted as 26 working days; wages here means basic + DA, not gross. Eligibility begins at five years of continuous service (with established exceptions for death and disablement), and service beyond six months in the final year rounds up: 7 years 8 months computes as 8 years, 7 years 5 months as 7. The result is capped at the Act's ceiling — ₹20 lakh for private-sector employees.
Two things people most often get wrong: computing on gross instead of basic + DA (which overstates the estimate substantially), and forgetting that the five-year gate is about continuous service with one employer: the clock does not carry across companies. The famous 4-years-and-240-days question has judicial history behind it; if your case sits on that edge, it is a question for a professional, not a calculator.
A worked example
Last drawn basic + DA of ₹30,000 after 7 years and 8 months: the eight months round the service up to 8 years, so gratuity = ₹30,000 × 15⁄26 × 8 = ₹1,38,462. The same salary at 7 years 5 months computes on 7 years (₹1,21,154) which is why exit dates near the six-month boundary are worth knowing about in advance. At 4 years 8 months, the formula pays nothing at all: eligibility has not vested, whatever the rounding says.
Illustrative; your wage definition and any employer policy above the statute will vary the outcome.
On exit, gratuity is one line of the full settlement — unpaid salary, leave encashment and recoveries net alongside it. That whole statement is what PeopleDeck's full & final settlement computes from records, with each line's working shown.
Frequently asked questions
What is the gratuity formula?
Last drawn wages (basic + DA) × 15/26 × completed years of service — fifteen days of pay per year, with a month counted as 26 working days. Service beyond six months in the final year rounds up to a full year; below six months, it drops.
Who is eligible for gratuity?
Employees with five years of continuous service with the same employer, payable on resignation, retirement or termination, with exceptions to the five-year rule for death and disablement. The clock does not carry between employers.
Is there a maximum gratuity amount?
The Act's ceiling for private-sector employees is ₹20 lakh (higher limits apply to central government employees; verify current caps for your situation). Employers may pay above the formula or ceiling voluntarily; tax exemption has its own limits worth checking at the time.
Does 4 years and 8 months qualify?
On the plain rule, no — eligibility vests at five years, and the six-month rounding applies only to service beyond the fifth year. There is judicial history around 4 years and 240 days in certain establishments; if your case sits on that edge, take professional advice rather than a calculator's word.
Is gratuity computed on gross salary?
No, on basic + DA as last drawn. Computing on gross is the most common overestimate; check the wage definition in your structure before planning around a number.
Every exit, settled from records.
Gratuity, encashment and recoveries, computed into one statement by PeopleDeck.
Start free