For employee to receive a gratuity fund in India, these are Gratuity Eligibility criteria

Dear Team,

I had collated the below data regarding gratuity.
Request you to please advise if there is anything missing.

For any employee to receive a gratuity fund in India, he should satisfy any of the following Gratuity Eligibility criteria:

  1. An employee should have rendered his/her services in an organization continuously for a minimum period of 5 years with a single employer.
  2. An employee should be eligible for superannuation.
  3. If an employee retires from his/her services.
  4. Death of the employee or an employee suffers disability due to accident or ill-health.

A person is eligible to receive gratuity only if they’ve completed 5 years of service with a single organisation, however, it can be paid earlier in case the employee dies or becomes disabled due to disease or accident.

The 1972 Payment of Gratuity Act has divided non-government employees into two categories:

Employees covered under the act

Employees not covered under the act

An employee will be covered under the Act if the organisation employs at least 10 persons on a single day in the preceding 12 months. And once an organisation comes under the purview of the Gratuity Act, then it will always remain covered even if the number of employees falls below 10.

For employees covered under the Act

There is a formula using which the amount of gratuity payable is calculated. The formula is based on the 15 days of last drawn salary for each completed year of service or part of thereof in excess of six months.

The formula is as follows:
(15 X last drawn salary X tenure of working) divided by 26

Here last drawn salary means basic salary, dearness allowance, and commission received on sales.

If you have worked for six months or more in a year, it is considered as one year for gratuity calculation. If you have worked less than 6 months in a year, that year is ignored.


Thanks @hr_diligencebio . Your article is very detailed and useful.

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