The formula to calculate the gratuity of an employee is (basic salary+DA /26) X 15 X No of years of service. Here 26 is the number of estimated working days in a month and 15 represents the 15 days salary in a month i.e half month salary. When we divide basic salary + DA with 26 then we will get per day wage. When we multiply per day wage with 15 then we will get half month salary.
Finally when half month salary is multiplied with no of years of service then we will get the actual gratuity amount that employee gets.
That amount of gratuity that an employee gets depends on the last drawn basic salary + Dearness Allowances.
For example if last drawn basic wags + DA of an employee is 20000 Rs, and his total service is 7 years then his gratuity calculation will be
(20000/26) X 15 X 7 = 80,769 RS
Every employee who completes a minimum 5 years of service in an organization will become eligible to get a gratuity amount under payment of gratuity act 1972.
Also read: Gratuity limit increased to 20 Lakhs