First five years
The estimate uses 21 days of the last basic wage for each of the first five completed years.
Service after five years
Additional service is calculated at 30 days of the last basic wage per year, with proportional treatment for an eligible partial year.
Last basic wage
The formula uses the last basic wage rather than an average of all historical wages, subject to the applicable framework and facts.
Overall cap
The traditional federal gratuity total is capped at two years' wage. Keep the cap separate from other final-settlement components.
Questions to ask HR or payroll
- What is the last basic wage?
- How many eligible years fall in each band?
- Is the partial year included?
- Were unpaid-absence days removed?
- Does the two-year wage cap affect the result?
Frequently asked questions
Does the 30-day rate apply to all years after I pass five years?
No. It applies to service after the first five years.
Is gratuity based on my original salary?
Traditional federal gratuity uses the last basic wage, not generally the starting salary.
Does resignation reduce the bands?
The current federal framework does not apply the old resignation reductions merely because the employee resigned.
Official sources used
Rules can change and facts can be disputed. Review the source that applies to your jurisdiction and current circumstances.