Gratuity Rules: Does the notice period count for a 5-year job? If you don't know, here are 7 rules to know..

Employees who have served a company for a long time receive a gratuity upon retirement or leaving their job. This amount is a reward from the company. However, it is important to understand the rules so that you do not lose your rights.

What is the gratuity calculation formula?
The formula for calculating gratuity is (last salary) × (total years of work) × (15/26). Last salary means the average basic salary + DA + commission for the last 10 months. Four Sundays in a month are considered weekends, so 26 days are counted.

Which companies are subject to gratuity rules?
If a private or government company has 10 or more employees, it is mandatory to pay gratuity. Factories, mines, and shops also fall under this category.

4 years 8 months = 5 years
If you have worked continuously for 4 years and 8 months, this period will be considered 5 years. This means that you are eligible for gratuity even after 4 years and 8 months. If your service is less than 4 years and 8 months, it will be counted as 4 years.

Notice Period Also Included
The notice period is also counted as part of your service period. For example, if you worked for 4.6 years and then gave 2 months' notice, your total service will be considered 4 years and 8 months, and you will receive gratuity based on 5 years.

Rule for Non-Registered Companies
If a company is not registered under the Gratuity Act, it is at its discretion to pay gratuity. In such a case, the formula will be different: half a month's salary per year × total number of years, and 30 days per month will be counted, not 26.

Tax Limit
A company can pay a maximum gratuity of Rs 20 lakh. This amount is tax-free. This rule applies to both government and private jobs.

What happens if the employee dies?
If the employee dies while in service, the entire gratuity amount will be paid to his or her nominee. In this case, the 5-year service requirement does not apply.

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