Sunday, January 22, 2012

Gratuity Calculations


It might be useful for you for calculation of Gratuity while working out CTC. Till now we too were calculating gratuity @ 4.16% which is wrong because we assume a month to be comprised of 26 working days and not 30 days while calculating Gratuity.

GRATUITY SHOULD BE CALCULATED AT 4.16% OR 4.83%

LOGIC BEHIND 4.16%

15 DAYS SALARY FOR 1 YEAR
OR
0.5 MONTHS SALARY FOR 1 YEAR
OR
0.5*5=2.5 MONTHS SALARY FOR 5 YEAR
OR
2.5 MONTHS SALARY FOR 60 MONTHS (12 X 5)

NOW 2.5 IS HOW MUCH %AGE OF 60 ?

2.5 X 100/60 = 4.16%

SO GRATUITY IS PAYABLE @ 4.16% WHICH IS WRONG RIGHT CALCULATION IS AS FOLLOWS:

LOGIC BEHIND 4.83%

15 DAYS SALARY FOR 1 YEAR
MONTH IS COMPRISED OF 26 WORKING DAYS NOT 30 DAYS
IT MEANS 57.69 % OF MONTHLY BASIC IS PAYABLE (15*100/26)
OR
0.58 MONTHS BASIC FOR 1 YEAR
OR
0.58*5 MONTHS BASIC FOR 5 YEARS
OR
2.9 MONTHS BASIC FOR 60 MONTHS (12 X 5)

NOW 2.9 IS HOW MUCH %AGE OF 60 ?

2.9 X 100/ 60 = 4.83 %

HENCE GRATUITY SHOULD BE CALCULATED @ 4.83% AND NOT 4.16%

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