Gratuity Calculator
Gratuity under the Code on Social Security, 2020 (in force from 21 November 2025): 15 days' wages per year of service, the new wage definition, and the 1-year rule for fixed-term employees.
Gratuity = last drawn monthly wages × 15 ÷ 26 × completed years of service (a part year over 6 months counts as a full year). Wages of ₹50,000 a month and 10 years of service give ₹2,88,462. You qualify after 5 years of continuous service, or after 1 year on a fixed-term contract, under the Code on Social Security in force since 21 November 2025.
The words on this page, explained simply
New to this? Here is what each term means, in plain English.
- Gratuity
- A lump sum your employer pays when you leave after long service: 15 days' wages for every year worked, under the Code on Social Security.
- Last drawn wages
- Your monthly basic pay plus dearness allowance on your last working month. Gratuity is calculated on this, not on your full salary.
- Basic + DA
- Your basic salary plus dearness allowance: two lines on your payslip. PF is usually 12% of this, not of your full salary. Some employers cap it at the wage ceiling: 12% of ₹25,000, i.e. ₹3,000 a month, since 17 September 2026.
- The 50% wage rule
- Under the Labour Codes, if allowances like HRA and conveyance are more than half your total pay, the extra is counted as wages. This can raise your gratuity and PF.
- Fixed-term employee
- Someone hired directly for a set period, such as a 2-year contract. They now get gratuity after one year of service, paid for the time worked.
Gratuity is a lump sum your employer pays when you leave after long service: on retirement, resignation, death or disablement, or at the end of a fixed-term contract. Since 21 November 2025 it is governed by the Code on Social Security, 2020, which replaced the Payment of Gratuity Act, 1972.
The formula
Gratuity = monthly wages last drawn × 15 ÷ 26 × years of service. The 26 is the number of working days in a month the law uses; 15 is the number of days' wages paid for each year. Each completed year counts, and a final part year of more than six months counts as a full year (section 53(2) and Explanation 3).
| Monthly wages (basic + DA) | Service | Gratuity |
|---|---|---|
| ₹25,000 | 5 years | ₹72,115 |
| ₹50,000 | 10 years | ₹2,88,462 |
| ₹75,000 | 15 years | ₹6,49,038 |
| ₹1,00,000 | 20 years | ₹11,53,846 |
| ₹1,50,000 | 25 years | ₹20,00,000 |
What counts as wages now
Wages are basic pay, dearness allowance and retaining allowance. Under the Labour Codes, if the excluded parts of your pay (HRA, conveyance, overtime, commission and the like) add up to more than 50% of your total pay, the excess is added back to wages. So if your basic + DA is under half your pay, your gratuity is worked out on a higher figure than before. The Labour Ministry has clarified that this wage definition applies to gratuity from 21 November 2025.
The calculator applies this when you enter your total monthly pay.
Who qualifies
Five years of continuous service, on superannuation, retirement, resignation, death or disablement. No minimum on death or disablement. Fixed-term employees qualify after one year of service under the contract and are paid pro rata. Working journalists qualify after three years. Gratuity is payable within 30 days.
The ceiling
Gratuity is capped at the amount the Central Government notifies (section 53(3)). That ceiling is ₹20 lakh: notified in March 2018 (S.O. 1420(E)) and confirmed as current in the Labour Ministry's FAQs on the Labour Codes. The calculator lets you change it. Your employer can pay more under a contract or settlement.
Key takeaways
- Gratuity = wages × 15 ÷ 26 × years; a part year over 6 months counts.
- 5 years' service needed; 1 year for fixed-term employees; none on death or disablement.
- Wages = basic + DA, plus any excess when other allowances exceed 50% of pay.
- Ceiling ₹20 lakh.
Frequently asked questions
How is gratuity calculated?
Last drawn monthly wages (basic + DA) × 15 ÷ 26 × completed years of service. ₹50,000 a month for 10 years gives ₹2,88,462.
Is gratuity paid after 4 years 7 months?
For a permanent employee the law asks for 5 years of continuous service, so the calculator shows no gratuity below that (except on death or disablement). Fixed-term employees qualify after one year.
What changed in gratuity under the new Labour Code?
From 21 November 2025: fixed-term employees qualify after one year, and wages include any excess of excluded allowances over 50% of pay, which can raise the amount.
What is the maximum gratuity?
₹20 lakh, the ceiling notified by the Central Government. An employer may pay more by contract.
Does 5 years 7 months count as 6 years?
Yes. A part year of more than six months counts as a full year.