Under the Indian labor laws, gratuity is a part of the employee’s salary package. It is a form of gratitude provided by the employer to an employee for his or her service to the company. One of the frequently asked questions regarding this benefit is how to calculate gratuity amount after 5 years of continuous service.
The Payment of Gratuity Act, 1972, governs the payment of gratuity in India. According to the Act, any employee who has served continuous service for five years or more is eligible to receive gratuity. The five years of service can be with one or more employers, provided there is no break in the employment.
Understanding Gratuity Calculation
The Act stipulates the following formula to calculate gratuity amount:
Gratuity = (Basic salary + Dearness Allowance) x Number of years of service x 15/26
The figure 15 represents 15 days of salary for each completed year of service, and 26 symbolizes the number of working days in a month.
Here’s an example: Suppose an employee with a basic salary and dearness allowance each of INR 20,000 has put in ten years of service. The gratuity amount would be:
Gratuity = (20,000 + 20,000) x 10 x 15/26 = INR 1,15,385
So, an employee with ten years of service and a monthly salary of INR 40,000 would receive a gratuity amount of INR 1,15,385.
Secondary Aspect: Changing Mobile Number in PF Account
In between calculating your gratuity and planning your retirement, it’s essential to ensure that your details are up-to-date in your provident fund (PF) account, particularly your mobile number. Here is how to change mobile number in pf account:
1. Visit the EPFO (Employees’ Provident Fund Organisation) official portal.
2. Go to the “Manage > Contact Details” section.
3. Click ‘Change Mobile No’.
4. Enter your new mobile number, re-enter to confirm, and then submit.
5. You will receive a verification code on your new number. Enter the verification code and click ‘Save changes.’
Disclaimer
Before making any financial decision, it is always recommended to understand all the pros, cons, rules and regulations. The information provided in this article is for educational purposes only and does not constitute investment advice.
Summary:
Gratuity is a statutory benefit paid to employees who have rendered continuous service for at least five years. It is a gratitude expressed by the employer towards his employee for his services. Gratuity calculation in India is governed by the Payment of Gratuity Act, 1972, and is calculated as Gratuity = (Basic salary + Dearness Allowance) x Number of years of service x 15/26. Also, it is essential to ensure your PF account details are up-to-date, including your mobile number. You can change your mobile number in the PF account by visiting the EPFO official portal. Remember, every financial decision should be taken after understanding all the possible pros and cons as these decisions have a direct impact on your financial well-being.