Although gratuity is one of the most important and well-known employee benefits, several working individuals still have a number of doubts about it. If you are one of them, do not worry as you are certainly at the right place now.

In this blog, we will answer the top questions related to gratuity, from its meaning to gratuity benefits. So, let’s dive in.



As mentioned earlier, it is one of the crucial employee benefits in India. Coming to the meaning, it is a sum of money given to an employee for his or her hard work and cooperation during the service period. In simpler words, it is like a token of appreciation given to employees by their companies.



Now that you know what gratuity is, you will be curious to know who all can enjoy this employee benefit.

When it comes to organizations, every government-based company is bound to provide its employees with this benefit. Private companies, on the other hand, that have ten or more headcounts are supposed to give their people the gratuity amount.

Now, let’s talk about the eligibility conditions for an employee: 

Working in a company doesn’t make anyone eligible for this employee benefit. On the contrary, s/he must have completed five or more years in the organization. Such employees are considered eligible for this benefit. 



This is one of the most common doubts related to gratuity benefits. A good number of people even presume this calculation to be acutely tough. But, not many know that the calculation of gratuity is simple. One just needs to know the correct formula and technique.

Here is the formula you need to use to find out your gratuity amount: 


15 * LWS* TP / 30

In this formula, LWS means last withdrawn salary 

TEP means total employment period

To get a clear understanding of the calculation, take a look at the example given below:

Sukriti gets a basic salary of INR 60k every month. She recently completed 6 years in her organization. Now, her gratuity payment will be as follows:

15 * 60,000* 6/ 30= INR 1, 80,000

Isn’t that very easy? Go check your gratuity payment now. 


Is it a mandatory benefit?

Gratuity has always been just a benefit plan. For a long time, it was not compulsory. That means companies had the option to give this payment to their employees. However, in the year 1972, the Government of India introduced the Payment of Gratuity Act. In the act, the govt. mentioned that this is a compulsory payment for every firm that has more than ten working individuals. 


Can employers refuse the payment?

Even if an employee completes five years or more with a company and meets all other eligibility conditions, there are some exceptional cases when an employer can deny the gratuity payment. Those situations are as follows:

  • If the person was terminated from his or her job due to any serious legal lawsuits
  • If the person was terminated from his or her position after any misbehavior or wrong conduct 


Are PF and gratuity the same?

Most often, people get confused between these two employee benefits. The one and only difference between the two is PF amount has both employers’ as well as employees’ contributions. Talking about gratuity, the full payment is done by the company. In essence, they are entirely different from one another.

So, these are some of the commonly asked questions related to gratuity. We hope this blog helps you to gain more knowledge about it, from the calculation of gratuity to its eligibility criteria. Next time anyone asks about gratuity, answer them with utmost confidence.

Author's Bio: 

Amit Kumar is a guest blogger and is well known to predict market trends. Check out his blog at Digital Drona