While government employees typically receive gratuity at the time of retirement, those who have worked for 5 years in private companies earlier become eligible for gratuity.
As the new labour codes kick in, replacing the 29 old labour laws, a considerable discussion has started in the country. Having been enacted five years ago, these labour laws envisage offering appointment letters to every worker, night shifts for women, cabs and security, and double pay for overtime, eliminating the distinction between skilled and unskilled workers in minimum wages, social security, and insurance for gig workers, among other reforms that are highly beneficial to millions of employees.
Under the new labour code, new gratuity rules will ensure that even employees who have worked for one year will be eligible for gratuity benefits. Prior to this, gratuity was offered to employees who had at least completed 5 years of continuous service with a company. Now, any employee who has served for one year will also be eligible for gratuity.
Gratuity has commonly been considered a symbol of loyalty. It is touted as a reward for continuous and dedicated work with the same company. While government employees typically receive gratuity at the time of retirement, those who have worked for 5 years in private companies earlier become eligible for gratuity. Gratuity is also awarded in the event of an untoward incident while the employee is employed.
Users can calculate gratuity by using a simple formula. It depends on your monthly basic salary and years of service. Here’s how:
Total gratuity = (Last basic monthly salary) x (15/26) x (Years of service)
For example, if you joined a job in November 2020 and tendered your resignation in November 2025, and in-case your last salary was Rs 1 lakh, with a basic salary of Rs 50,000. Your gratuity would be calculated as:
50,000 x (15/26) x 5 = Rs 1,44,230
What is 26 in this formula?
Some of the employees may wonder where the number 26 in the formula comes from. To declutter this, except for February, which has 28 or 29 days, each of the 11 months of the year has 30 or 31 days. Now, as per the labour code, subtracting at least four weekly holidays gives a total of 26. This is where the 26 in the formula comes from.
