Gratuity-related questions in your mind – All you need to know

Gratuity Rule: You should know that gratuity is given even for a job of less than 5 years. There are some special rules for this. Many people are confused about whether the notice period is counted in gratuity calculation or not?

Employees working in the private sector are always confused about gratuity. The most discussed topic among them is how gratuity is calculated. After how many years of service one gets gratuity.

Although everyone knows that gratuity is given after 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 a job of less than 5 years. There are some special rules for this. If you have any questions related to gratuity in your mind, then you will find its answers below.

Question- What is Gratuity?

Answer- Gratuity is given by the company to its employees. It is a way of expressing gratitude from the company to the employee in return for continuous service. It is a big financial support for the employees.

Question- Are all private employees entitled to gratuity?

Answer- 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.

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Question- After how many years of work does one get gratuity?

Answer- Generally, employees working continuously for 5 years in any institution become eligible for gratuity. But in some cases, gratuity benefit is 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.

Question- Do we get the benefit of gratuity before 5 years?

Answer- According to Section-2A of the Gratuity Act, if the employees working in underground mines complete 4 years and 190 days continuously with their employer, then they get the benefit of gratuity. Whereas, the employees working in other organizations become eligible for gratuity after working for 4 years and 240 days (i.e. 4 years and 8 months).

Question- Does the notice period also count in gratuity?

Answer- Yes, many people are confused about whether the notice period is counted in gratuity calculation or not? The rule clearly states that the notice period is counted in ‘continuous service’, so the notice period is added to the gratuity.

Question- How is the amount of gratuity calculated?

Answer- It is a 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. An employee can get a maximum gratuity of Rs 20 lakh.

It is worth noting that as per the rules till now, to get gratuity, it is necessary for the employee to work continuously for 5 years in a single company. However, the central government is considering reducing it to 3 years. If this happens, employees working in the private sector will benefit on a large scale.

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