look news india
Employees working in the private sector are always confused about gratuity. The most discussed topic is how gratuity is calculated. After how many years of service one gets gratuity.
Well, everyone knows that gratuity is given for working continuously for 5 years in an institution. But if you also do a private job, then you should know that gratuity is given even for less than 5 years of service. There are some special rules for this. If you have any question related to gratuity in your mind, then you will get its answers below.
What is gratuity?
Gratuity is given by the company to its employees. In a way, it is a way of expressing gratitude from the company to the employee in return for his continuous service. It is a big financial support for the employees.
Are all private employees entitled to gratuity?
The Payment and Gratuity Act applies to all factories, mines, oil fields, ports and railways in the country. Along with this, employees of shops and companies employing more than 10 people also get the benefit of gratuity.
After how many years of work do we get gratuity?
Generally, employees who work continuously for 5 years in any institution become eligible for gratuity. But in some cases, gratuity benefits are available even for less than 5 years of service. 'Continuous work' is clearly defined in Section 2A of the Gratuity Act. According to this, many employees can get the benefit of gratuity even if they do not work for the full 5 years.
Do we get gratuity benefits before 5 years?
According to Section 2A of the Gratuity Act, employees working in underground mines get the benefit of gratuity if they complete 4 years and 190 days of continuous service with their employer. Whereas, employees working in other organisations become eligible for gratuity after working for 4 years and 240 days (i.e. 4 years and 8 months).
Does notice period also count towards gratuity?
Yes, many people are confused about whether notice period is counted in gratuity calculation or not? The rule clearly states that notice period is counted as 'continuous service', hence notice period is added to gratuity.
How is the amount of gratuity calculated?
This is very easy way, you can calculate your gratuity yourself.
Total Gratuity Amount = (Last Salary) x (15/26) x (Number of years worked in the company).
Understand with an example: Suppose you have worked in the same company for 7 consecutive years. If the last salary is Rs 35000 (including basic salary and dearness allowance) then the calculation will be something like this-
(35000) x (15/26) x (7) = Rs 1,41,346. The maximum gratuity an employee can get is Rs 20 lakh.
It is worth noting that as per the current rules, for gratuity, it is necessary for the employee to work continuously for 5 years in the same company. However, the central government is considering reducing it to 3 years. If this happens, then the employees working in the private sector will benefit on a large scale.