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Gratuity Calculator: The new Labor Code has completely changed the gratuity rules, bringing significant relief to employees. Now, even one year of continuous service qualifies for gratuity, compared to five years previously. Let's understand how much money will be earned on a basic salary of ₹34,500 or ₹45,500.

Gratuity Received in 1 Year
With the new Labor Code, the biggest concern for employees regarding gratuity has been resolved. Previously, five years of continuous service was required to qualify for gratuity, but now this time limit has been reduced to just one year. This means that employees are now eligible for gratuity even after just one year of service. However, there is an important condition that very few employees are aware of, which determines whether they are eligible for gratuity even after completing one year.

When will you receive one-year gratuity?
Gratuity is only available if an employee has worked for the company for one consecutive year without any long breaks. For example, if an employee is leaving a job, their gratuity will be calculated from the day they joined until their last working day. However, if they have taken a long leave or break in between, this can complicate the process of receiving their gratuity. Therefore, it is important to understand how gratuity is correctly calculated and what factors are taken into account.

How to Understand Gratuity
Now the biggest question is how much gratuity is received for just one year of service. The answer is quite easy, because the gratuity formula is predefined. It involves adding your last basic salary and DA, multiplying that amount by 15, and then dividing by 26. This formula was developed keeping in mind 15 days' salary and 26 average working days. With this simple calculation, any employee can quickly calculate their gratuity.

What is its formula?
Employees often worry about how much gratuity they will receive upon leaving their job. Fortunately, the formula is very simple, and anyone can understand it themselves. Gratuity is determined based on your last basic salary, a fixed value of 15 days, and your total number of years of service. The formula is: Last Basic Salary × (15/26) × Total Years. With this simple calculation, you can quickly determine how much extra money you will receive upon leaving your job.

What is the connection between 26?
Many employees don't understand the reason for the 26 in the gratuity formula, although the calculation behind it is quite simple. According to the new Labor Code, an average of 26 working days is considered in a month, as this is the number of actual working days left after excluding weekly holidays. This is why 26 is used in the calculation of gratuity. Now, suppose an employee's basic salary is ₹70,000, and they leave their job after one year, their gratuity can be immediately calculated using this formula.

What would be the gratuity for ₹34,500 in one year?
If your basic salary is ₹34,500, the gratuity received for one year of service is approximately ₹19,904. This means that even employees with shorter tenures are now receiving direct benefits. Previously, gratuity was not available until five years of service had been completed, but with the new rules, employees with one, two, or three years of service are now eligible for this benefit. This change is proving to be a major relief, especially for young people changing jobs and those working on a contract basis.

How much will you receive for Rs. 45,500?
Yes, if your basic salary is around Rs. 45,500, you'll receive a substantial gratuity amount within just one year. Based on this salary, you'll receive a gratuity of approximately Rs. 26,250 from your company. This means that in just 12 months, you'll receive Rs. 26,250 in gratuity, which would be approximately Rs. 1,31,250 under the 5-year gratuity rule.

Understand the One-Year Calculation
Calculating gratuity for one year of service is very easy, as the government has already established a formula. This involves adding your last basic salary and DA, multiplying the amount by 15, and then dividing by 26, which represents the average working days in a month. For example, if an employee's last salary is ₹34,500 and they have worked for one year, they receive approximately ₹19,904 in gratuity based on (34,500 × 15 × 1)/26. This means that even a short-term job yields a substantial amount.

If you need money, understand the key points of gratuity.

Gratuity is as simple to understand as it is beneficial. It is paid as an amount equal to your last basic salary plus 15 days' DA. The higher the salary, the higher the gratuity. Significantly, even working for more than six months at a company is considered a full year. This means that even an employee with 11 months of service is eligible for gratuity. The biggest advantage is that gratuity is completely tax-free, which is a great relief for those who frequently change jobs.

Disclaimer: This content has been sourced and edited from Zee Business. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.