Set who’s eligible for gratuity and how it’s calculated - and include it automatically in Full & Final settlements.
Gratuity is a lump-sum amount paid to employees when they leave the organization, as a reward for their length of service. The Gratuity tab sets who’s eligible and how the amount is calculated. When Gratuity is turned on, PrimeHR includes it automatically in Full & Final settlements for eligible employees.
How to Access Gratuity Settings
Log in to the Admin Panel.
Go to Settings → Organization Settings → Statutory Compliance.
Open the Gratuity tab.
To turn Gratuity on, use the Enable Gratuity toggle at the top right. While it’s turned off, a notice on the page reminds you that gratuity won’t be included in Full & Final settlements.
Eligibility and Calculation
The values below are examples - check the values shown in your account.
Minimum Service (e.g., 5 years) - how long an employee must work to be eligible
Continuous Service (e.g., Yes) - whether the service must be uninterrupted
Maximum Limit (e.g., ₹20,00,000) - the maximum tax-free gratuity amount
Formula - the formula used to calculate gratuity (see below)
How Gratuity Is Calculated
Gratuity = Last drawn salary × Years of service × 15 ÷ 26
Last drawn salary - the employee’s Basic + DA (Dearness Allowance)
15 - gratuity is paid at 15 days’ salary for each year of service
26 - the number of working days in a month
For example, an employee with a last drawn Basic + DA of ₹30,000 and 6 years of service receives ₹30,000 × 6 × 15 ÷ 26 = ₹1,03,846.
When Gratuity Is Paid
Retirement - after completing 5 years of service
Resignation - after completing 5 years of service
Death or disability - no minimum service period is required
Termination - only if the termination is due to illness or incapacity
Why it helps
Gratuity is calculated automatically, using the standard formula
Eligibility rules are applied the same way for every employee
Gratuity is included in Full & Final settlements without manual work
Fewer calculation errors when employees leave