Oracle Fast Formulas - Chapter 48: Fast Formula for Gratuity Calculation

 Chapter 48: Fast Formula for Gratuity Calculation

Overview:

This formula calculates the Gratuity amount payable to an employee at the time of exit, based on years of service and the last drawn salary. Gratuity is a statutory payment in many countries (e.g., India) for employees completing a minimum number of years in service.

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Business Logic:

• Gratuity = (Last Drawn Salary × 15 × Years of Service) / 26

• Applicable only if Years of Service ≥ 5

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Inputs Required:

• LAST_DRAWN_SALARY: Basic + DA

• YEARS_OF_SERVICE: Total service years

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Sample Formula:

DEFAULT FOR LAST_DRAWN_SALARY IS 0
DEFAULT FOR YEARS_OF_SERVICE IS 0

INPUTS ARE LAST_DRAWN_SALARY, YEARS_OF_SERVICE

IF YEARS_OF_SERVICE >= 5 THEN
    GRATUITY = (LAST_DRAWN_SALARY * 15 * YEARS_OF_SERVICE) / 26
ELSE
    GRATUITY = 0
ENDIF

RETURN GRATUITY

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Use Case Example:

• Last Drawn Salary: ₹50,000

• Years of Service: 10
  → Gratuity Amount: (₹50,000 × 15 × 10) / 26 = ₹2,88,462

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Best Practices:

• Ensure YEARS_OF_SERVICE is calculated using the Joining Date and Exit Date.

• Configure proration for partial months if required by law.

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Practice Quiz:

1. What is the minimum number of years required to be eligible for gratuity?

2. How is gratuity calculated for partial years?

3. Can this formula be adapted for different countries’ gratuity rules?