Freedom Fragrances

An Overview of Gratuity

(1) Applicability:
Gratuity benefits are governed by "The Payment of Gratuity Act 1972" and paid by the
Company to an employee in addition to his salary on exit from the company. Gratuity shall be
payable to an employee on the termination of his employment after he has rendered
continuous service for not less than five years, -

(a) on his superannuation, or

(b) on his retirement or resignation, or
(c) on his death or disablement due to accident or disease:

Provided that the completion of continuous service of 5 years shall not be necessary where the
termination of the employment of any employee is due to death or disablement:

(2) Eligibility :
Regular employees who not work less than 05 years

(3) Calculation of Gratuity Benefits:-

Gratuity is a statutory right of employee whoever completes 5 years in the same organization
and is a terminal benefit. It means, Gratuity amount will be determined when monthly terminal
wages of the employee are known to the company. The terminal wages will include Basic &
Dearness allowance only. The Gratuity Benefits are calculated using the following formula:-

(4) Example and Formula of gratuity :-

Example: if One employee Mr. Akash had been drawing Rs. 20000/-as his last basic salary with
05 Years of employment tenure, then the gratuity amount he will receive as per the formula is :

Formula for calculation of gratuity amount : -

Total Gratuity Payable = (Last Drawn Monthly Salary) x (15/26) x (Number of years of service
completed).

Example :
Gratuity = Rs. 20000 *(15/26 ) * 5 = 57692

(5) Benefits to Employer of Gratuity :-

The benefits of gratuity are numerous. First and foremost, it is a recognition of the employee's years of
dedicated service to the company. It is also a way of rewarding the employee for his or her loyalty and
hard work. Gratuity can help to improve employee morale and motivation and can help to reduce staff
turnover.