Understanding 15/26 in Gratuity Calculation: A Complete Guide

The term 15/26 often comes up when discussing gratuity, and it simply explains how your gratuity is calculated. Under the Payment of Gratuity Act, 1972, an employee earns 15 days of salary for every completed year of service, based on a month having 26 working days (excluding Sundays). In simpler terms, the formula converts your monthly salary to a per-day value and multiplies it by 15 to calculate your gratuity for each year of service.

Here's how it works:

• A month is considered to have 26 working days.
• Your daily wage is calculated as Last Drawn Salary ÷ 26.
• Then, the daily wage is multiplied by 15 to find the 15-day salary component for each completed year.

So, the ratio 15/26 is just a way to convert your monthly earnings into a fair 15-day equivalent for gratuity purposes.

Example: If your last drawn basic salary (including dearness allowance) is ₹39,000, and you've worked for 10 years, your gratuity would be:
(39,000 × 15 × 10) ÷ 26 = ₹2,25,000 (approximately).

This calculation method helps ensure that every eligible employee receives a fair and consistent gratuity amount, no matter the month or company size.

Now that you know what the 15/26 ratio means, let's understand how it's actually used to calculate gratuity. The formula is designed to ensure every employee receives a fair amount based on their last drawn salary and the number of years they've worked for the company.

The standard formula for gratuity is:
Gratuity = (Last Drawn Salary × 15 × Number of Completed Years of Service) ÷ 26

Here's what each part means:

• Last Drawn Salary: The sum of your Basic Pay + Dearness Allowance (DA) at the time you leave the company.
• 15: Represents 15 days of salary given for each completed year of service.
• 26: Refers to the average number of working days in a month, excluding weekly offs.
• Completed Years of Service: Total full years you've worked in the organization (part years may be rounded off depending on company policy).

When you calculate gratuity, everything revolves around one key figure — your last drawn salary. This amount serves as the foundation for computing the gratuity you're entitled to receive when you leave your job after completing the required years of service.

In simple terms, "last drawn salary" refers to the salary you were earning at the time of leaving the company, either due to resignation, retirement, or termination. However, not every element in your payslip is considered for this purpose. The law clearly defines what should be included and what should not.

Salary Components Included and Excluded

According to the Payment of Gratuity Act, 1972, only specific components of your salary are counted while calculating gratuity. These are:

Included in Last Drawn Salary:

• Basic Salary – the fixed component of your monthly income
• Dearness Allowance (DA) – paid to help employees cope with inflation

Together, these form the amount considered as your "last drawn salary" for gratuity purposes.

Excluded from Last Drawn Salary:

• House Rent Allowance (HRA)
• Conveyance or Travel Allowance
• Overtime payments
• Performance incentives or commissions
• Special or one-time allowances
• Bonuses

The reason these are excluded is that they are variable or conditional in nature, not a guaranteed part of your monthly earnings.

Clarifying Myths: Are Bonuses and Incentives Included?

A common misconception among employees is that bonuses, incentives, or commissions increase their gratuity amount. In reality, they do not. Bonuses and incentives are not considered part of your basic salary because they depend on performance, company profits, or specific targets. Gratuity, on the other hand, is meant to reward your long-term service, not short-term achievements.

A common question employees often ask is whether gratuity is calculated only on the basic salary or on the entire monthly salary. The short answer is that gratuity is calculated on your basic salary plus dearness allowance (DA), not on your gross or total pay. The Payment of Gratuity Act, 1972, clearly defines that gratuity is linked to the "last drawn salary," which includes Basic Pay and DA. Other allowances, such as HRA, bonus, or overtime, are not included in this calculation because they vary from month to month and are not considered part of an employee's fixed earnings.

Explanation and Legal Guidelines

According to Section 2(s) of the Payment of Gratuity Act, 1972, the term "wages" for gratuity purposes includes only:

• Basic Salary
• Dearness Allowance (DA)

This means gratuity is based on the consistent portion of your income — the part that remains stable regardless of performance or company profits.

Example: If your basic salary is ₹30,000 and DA is ₹5,000, your last drawn salary for gratuity purposes will be ₹35,000. This figure will be used in the 15/26 formula to determine your final gratuity amount.

This rule applies uniformly across all organizations covered by the Gratuity Act, ensuring fair, standardized payments to employees.

Role of Dearness Allowance in Calculation

Dearness Allowance (DA) is an essential component of the gratuity formula, particularly for government and public-sector employees. It is paid to offset inflation and is directly linked to the cost-of-living index. Since DA forms part of your fixed earnings, it is included in the "last drawn salary" for gratuity calculation.

For private sector employees, some organizations may not have DA as a separate component. In such cases, gratuity is generally calculated on basic pay only unless the company policy states otherwise.

How Different Employers May Differ in Practice

While the legal guidelines are clear, the actual practice can vary from one employer to another. Some organizations, especially in the private sector, may choose to offer better gratuity benefits than those mandated by law.

For example:

• Certain companies may include special allowances or fixed components in the calculation.
• Others might calculate gratuity on the entire CTC, as part of an enhanced employee benefits plan.

However, the minimum requirement under Indian law remains the same — gratuity must be calculated on Basic Salary + Dearness Allowance. Anything beyond that depends on company policy and is considered an additional benefit, not a legal obligation.

Understanding the 15/26 ratio in gratuity calculation is not just about knowing the formula. It is about being conscious of your financial rights and confidently shaping your future. It is a fact that most workers don't know how their gratuity is calculated, which may leave them confused or even underpaid. Thus, by learning this ratio, you not only get to check your gratuity amount, but also become empowered to make other financial decisions you understand.

Supports Retirement and Financial Planning

Gratuity is one of the main components of your income after retirement or when you change jobs after a long period of service. As a matter of fact, knowing the 15/26 ratio and its relation to your final payout enables you to:

• Calculate the gratuity that you are entitled to by the number of years that you have served.
• Prepare your retirement savings, plans, and investments more effectively.
• Create long-term financial goals and ensure stability.

If you understand how the 15/26 ratio functions, you can work out the amount of gratuity you will receive as your work tenure increases — and thus, you will be able to prepare your financial future with more certainty.

Guarantees Gratuity Payment at a Fair Level and Informs of Legal Rights

Knowledge of the 15/26 ratio can likewise give employees a shield against mistakes in gratuity payments. Since gratuity is a legal entitlement under the Payment of Gratuity Act, 1972, being aware of its calculation method helps ensure you get what you deserve. Apart from that, it assists both employees and employers in ensuring they use the legal standard of adding Basic Salary + Dearness Allowance, then applying the 15/26 formula correctly.

If an establishment pays less than what has been calculated, then it is up to you to know how to express your dissatisfaction or seek an explanation. Figuring out the 15/26 ratio is the solution to issues related to transparency, compliance with the law, and the financial safety of employees who have given their loyalty to their companies for years.

Calculating gratuity doesn't have to be confusing or time-consuming. Whether you're planning for retirement or simply curious about your entitlements, you can easily find out your gratuity amount using online calculators or by doing a quick manual calculation with the 15/26 formula. Understanding both methods ensures you can double-check the figures and remain confident in the result.

Using Online Gratuity Calculators

The quickest and most convenient way to estimate your gratuity is by using a gratuity calculator. These tools save time and eliminate manual errors, giving you an instant estimate based on your inputs.

You can try this reliable online tool here:
👉 Gratuity Calculator – JezzMoney

Simply enter the following details:

• Your last drawn basic salary (plus DA)
• Years of completed service
• Number of months in your current employment year

Once you fill in these fields, the calculator will instantly display your estimated gratuity amount based on the standard 15/26 formula. Online calculators are handy if you've served for many years or want to project how your gratuity might grow over time. However, note that the figure is an approximation; your final payout may vary slightly depending on your employer's policies or rounding methods.

Manual Calculation Checks Using 15/26 Formula

If you prefer verifying the result yourself, you can easily calculate gratuity manually using this formula:

Gratuity = (Last Drawn Salary × 15 × Number of Completed Years of Service) ÷ 26

Step-by-step guide:

1. Note your last drawn salary (Basic + Dearness Allowance).
2. Multiply it by 15 (the number of salary days per completed year).
3. Multiply that result by your total completed years of service.
4. Divide the total value by 26, representing the average number of working days in a month.

Example: If your last drawn salary is ₹42,000 and you've worked for 8 years, then:
(42,000 × 15 × 8) ÷ 26 = ₹1,93,846 (approximately).
This gives you a close estimate of your gratuity amount. Doing the calculation manually not only confirms accuracy but also helps you clearly understand how the 15/26 ratio works in practice.