The gratuity calculation formula for employees covered under the Payment of Gratuity Act is: last drawn monthly wages multiplied by 15, divided by 26, multiplied by completed years of service. Here wages usually mean basic pay plus dearness allowance, not the full salary. This calculator lets you edit each assumption and see the effect on the result.
Breaking the formula into parts
- Last drawn wages: basic plus dearness allowance, if any, at the time you leave. Allowances such as HRA and special allowance are generally not included, but check your payslip structure.
- 15: the number of days of wages counted for each year of service.
- 26: the number of working days assumed in a month.
- Years of service: continuous service completed with the employer, with a rounding rule for part years.
In words: take one month of eligible wages, divide it by 26 to get a daily rate, multiply by 15 days, then multiply by your years of service.
Assumptions you can change
The calculator keeps the key assumptions visible so you can test different cases. You can edit the wage figure, the years and months of service, and the maximum amount applied to the payout. The legal ceiling and eligibility rules can be revised, so treat any cap in the tool as an assumption and confirm the current position with your employer, the labour authority or a qualified professional.
Gratuity calculation formula: worked example
This example is illustrative. Assume last drawn basic plus DA of Rs 40,000 a month and eight completed years of service.
- Daily rate: 40,000 divided by 26 is about Rs 1,538.
- Fifteen days: 1,538 multiplied by 15 is about Rs 23,077 per year of service.
- Eight years: 23,077 multiplied by 8 is about Rs 1,84,615.
If the same employee had a basic of Rs 20,000 and a large special allowance, the result would be half, which shows why the wage definition matters more than the CTC figure.
Employees not covered by the Act
Some employers pay gratuity under their own policy even when the Act does not apply. In such cases the formula is often different, commonly using fifteen days of wages divided by thirty. Your appointment letter or HR policy is the authority here, so read it before using any estimate.
Common mistakes
- Don't use total CTC or gross salary as the wage figure.
- Don't round up years unless your employer's policy or the rule allows it.
- Don't expect gratuity if you have not met the minimum service condition.
- Do use the wage figure from your last drawn payslip, not your joining salary.
- Do keep the tool's cap assumption in mind when the answer looks large.
Next step
If you are planning an exit and your gratuity is part of the decision, update your primary resume in CVTara and use the application tracker to follow your job applications while you serve your notice.
You can also run an ATS match against a real job description, or read our related guide: Leave Encashment Taxable Formula.
Frequently asked questions
What is the gratuity calculation formula?
For covered employees it is last drawn wages multiplied by 15, divided by 26, multiplied by completed years of service.
Which salary components count as wages?
Usually basic pay plus dearness allowance, but check your payslip and employer policy to confirm what applies in your case.
Is the calculator result the final payout?
No, it is an estimate, so confirm the figure with your employer's HR or payroll before relying on it.