How Much Gratuity You Can Expect After 9.7 Years Of Continuous Service Based On Your Salary

Gratuity is one of the most significant financial benefits employees receive after dedicating years of service to a company. It’s a formal gesture of gratitude extended by employers, mandated under Indian law, once an employee completes a certain period of continuous employment. What many employees may not realise is that service beyond six months is rounded up to a full year for this calculation. Let’s explore how gratuity works, the legal eligibility, and the exact figures for different salary brackets after completing nearly ten years of service.

Who Is Eligible To Receive Gratuity?

Gratuity is governed by the Payment of Gratuity Act, 1972, and applies to all organisations that employ ten or more individuals. An employee becomes eligible for this benefit after completing five years of continuous service. However, in cases such as death or permanent disability, this minimum service rule is waived, and gratuity becomes payable regardless of tenure.

The Legal Basis For Gratuity Payments

Once a company falls under the scope of the Payment of Gratuity Act, it is legally required to follow its provisions. No employer can opt out if they meet the conditions laid out in the Act. This includes private firms, public enterprises, and other registered establishments. Gratuity is payable at the time of resignation, retirement, superannuation, or due to disability or death.

How Is Gratuity Calculated?

The formula for computing gratuity under Indian labour law is as follows:

Gratuity = (Last Drawn Basic Salary × Years of Service × 15) ÷ 26

Here, "15" represents 15 days of salary per year of service, and "26" represents the number of working days in a month (excluding Sundays). Importantly, if an employee has worked for nine years and seven months, it is considered a full 10 years for calculation purposes.

Gratuity Calculation For Different Salaries

To understand how this works in real numbers, let’s calculate the gratuity for employees drawing different basic salaries, assuming 10 years of completed service (rounded from 9 years and 7 months).

If Your Basic Salary Is ₹72,000

Using the formula:
Gratuity = (72,000 × 10 × 15) ÷ 26
Result: ₹4,15,384

If Your Basic Salary Is ₹84,000

Gratuity = (84,000 × 10 × 15) ÷ 26
Result: ₹4,84,615

If Your Basic Salary Is ₹96,000

Gratuity = (96,000 × 10 × 15) ÷ 26
Result: ₹5,53,846

These figures highlight the tangible financial benefit of long-term employment. As basic salary increases, so does the gratuity payout, making it a crucial part of retirement or exit planning.

Do You Have To Complete Exactly 5 Years?

Yes, the minimum eligibility is five years of continuous service. However, any period exceeding six months in the final year is rounded up. So, 4 years and 11 months does not qualify, but 5 years and 1 day does. This small distinction makes a huge difference in financial terms and often determines whether gratuity is paid at all.

When Will You Actually Receive The Gratuity?

Gratuity becomes payable under the following conditions:

• On retirement or superannuation

On voluntary resignation after five years

In case of death or permanent disability

When the company discontinues operations

In the case of death or disability, the legal heirs or nominee are entitled to the amount.

Many employees overlook gratuity when planning for the future, focusing only on provident funds or pensions. However, gratuity can offer a lump sum benefit that proves invaluable during transitions, especially post-retirement. Understanding the law, knowing how to calculate your potential earnings, and ensuring your employer complies with regulations can significantly strengthen your long-term financial health.

Disclaimer: This article is for informational purposes only. Please consult financial advisors or legal experts before making employment or retirement decisions.