Gratuity HR Liability

Calculate employer gratuity liability and annual provision for employees. Useful for HR teams to plan gratuity fund and payroll cost forecasting.

Gratuity HR Liability Calculator

Calculate employer gratuity provision and liability for HR planning

Employee monthly basic salary Rs 40,000
Rs
Number of employees 10
employees
Average years of service 5 yrs
yrs
Annual salary increment 8%
%
Total gratuity liability
---
all employees combined
Monthly provision
---
total per month
Per employee gratuity
---
at current service
Monthly basic (avg)---
Monthly provision per employee---
Annual provision (all)---
Gratuity per employee (accrued)---
Total gratuity liability---

Based on Payment of Gratuity Act formula. Actual liability depends on individual service years and last drawn salary.

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ThriftRupee Insight

Employers must provision 4.81% of basic salary annually for gratuity (= 15 days x 12 months / 26 working days). For a team of 20 employees at Rs 40,000 average basic, annual gratuity provision is Rs 4.6 lakh. Companies with 10+ employees must have a gratuity fund or insurance policy. The Payment of Gratuity Act mandates payment within 30 days of eligibility -- delayed payment attracts interest.

Gratuity HR Liability Calculator India 2026

Calculate total employer gratuity liability and monthly provision for your team. Useful for HR teams, CFOs, and startup founders to forecast payroll costs accurately.

Frequently asked questions

How does an employer calculate gratuity provision?▼
Annual gratuity provision = (Basic salary / 26) x 15 x 1 year = Basic salary x 15/26. This is approximately 57.69% of monthly basic or 4.81% of annual basic. For payroll purposes: monthly provision = basic salary x 15 / 26 / 12 = basic x 4.81% / 12. This is booked as an expense and liability each month regardless of when gratuity is actually paid.
Is gratuity included in CTC?▼
Yes -- most companies include gratuity provision (4.81% of basic) in CTC. This inflates CTC without increasing monthly take-home. On a Rs 10 lakh CTC with Rs 4 lakh basic, gratuity = Rs 19,240/year. Employees who leave before 5 years do not receive gratuity -- the employer retains this provision as income. This is why CTC can significantly overstate actual compensation.
What is a gratuity trust or fund?▼
Companies with 10+ employees can set up an approved gratuity trust or purchase group gratuity insurance (LIC, HDFC Life). Annual premium is based on actuarial valuation of future liability. This gives a tax deduction for the employer (premium is a business expense) and ensures funds are available when employees retire or leave. Smaller companies often pay gratuity from working capital when due.

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