Gratuity Rule

Overview

Gratuity Rule – Business Overview

The Gratuity Rule is a payroll configuration document in Dafater that defines how employee gratuity (end-of-service benefit) is calculated and paid by the organization. It acts as the business policy framework that ensures gratuity payments are fair, compliant with labor regulations, and consistently applied across the company.

What the Gratuity Rule Is Used For

The Gratuity Rule is used to: - Define how gratuity amounts are calculated based on employee service duration, salary structure, and company policy. - Standardize gratuity calculations across all eligible employees. - Support accurate settlement of employee dues during resignation, retirement, or termination. - Ensure compliance with local labor laws and internal HR policies.

In simple terms, it tells Dafater “how much gratuity an employee is entitled to and under what conditions.”

Prerequisites Before Using Gratuity Rule

Before setting up and using a Gratuity Rule, the business should ensure:

Employee master data is complete, including joining dates and salary details.
Salary structures are clearly defined, especially which salary components are considered for gratuity calculation.
Company gratuity policy is finalized, including eligibility criteria and calculation method.
Payroll periods and payroll processing are already in use within Dafater.

Without these basics, gratuity calculations may be inaccurate or incomplete.

Typical Workflow and Business Process Fit

Policy Definition
HR or management defines the organization’s gratuity policy based on legal and business requirements.
Gratuity Rule Setup
The policy is documented in Dafater using the Gratuity Rule, specifying service slabs, calculation basis, and eligibility conditions.
Employee Lifecycle Usage
During employment, the Gratuity Rule remains in the background and does not affect monthly payroll.
End-of-Service Settlement
When an employee exits (resignation, retirement, contract completion, etc.), Dafater uses the applicable Gratuity Rule to calculate the gratuity amount automatically.
Final Payment Processing
The calculated gratuity is included in the employee’s final settlement for payment and accounting.

Key Business Scenarios Where Gratuity Rule Is Essential

Employee Resignation or Termination
Ensures accurate and fair gratuity calculation during final settlement.
Retirement or Long-Service Benefits
Supports correct payouts for long-serving employees.
Legal and Audit Compliance
Demonstrates that the organization follows documented and consistent gratuity policies.
Multi-Policy Organizations
Useful when different employee groups or regions follow different gratuity rules.

Important Considerations for Users

Accuracy of Policy
The Gratuity Rule should exactly reflect legal requirements and internal HR policy to avoid disputes.
Regular Review
Labor laws and company policies may change, so gratuity rules should be reviewed periodically.
Employee Eligibility
Ensure clarity on minimum service period and conditions under which gratuity is payable.
Consistency
Use approved and standardized Gratuity Rules to prevent manual overrides and calculation errors.
Transparency
Clear rules help HR explain gratuity calculations confidently to employees.

Summary

The Gratuity Rule is a critical payroll policy document in Dafater that governs how employee end-of-service benefits are calculated and paid. When properly set up and maintained, it protects the organization legally, ensures fairness for employees, and simplifies final settlement processes.

Basic Information

Module: Payroll
Document Type: Other

Fields

Field Name	Label	Type	Required	Options	Description
disable	Disable	Check		-	Disable this gratuity rule from use in Dafater.
calculategratuityamountbasedon	Calculate Gratuity Amount Based On	Select	✓	Current Slab, Sum of all previous slabs	Method Dafater uses to calculate gratuity amount across slabs.
totalworkingdaysperyear	Total working Days Per Year	Float		-	Defines annual working days used for gratuity calculation.
contract_type	Contract Type	Select	✓	Fixed Term, Indefinite	Employee contract type applicable for this gratuity rule.
workexperiencecalculation_function	Work Experience Calculation Method	Select		Round off Work Experience, Take Exact Completed...	Determines how Dafater calculates employee work experience years.
minimumyearfor_gratuity	Minimum Year for Gratuity	Int		-	Minimum service years required to qualify for gratuity.
typeoftermination	Type of Termination	Select	✓	Resignation, Termination of the contract, Expir...	Termination scenarios where this gratuity rule applies.
applicableearningscomponent	Applicable Earnings Component	Table MultiSelect	✓	Gratuity Applicable Component	Earnings components considered by Dafater for gratuity calculation.
reasonsfortermination	Reasons for Termination	Data		-	Specific termination reasons impacting gratuity eligibility.
gratuityruleslabs	Current Work Experience	Table	✓	Gratuity Rule Slab	Defines gratuity calculation slabs based on work experience.
totalendofserviceamount	Total End of Service Amount	Table		Total end of service amount	Stores calculated total end of service gratuity amounts.

Child Tables

Current Work Experience (Gratuity Rule Slab)

Field Name	Label	Type	Required	Options	Description
from_year	From(Year)	Int	✓	-	Starting completed service years for this gratuity slab
to_year	To(Year)	Int	✓	-	Ending completed service years for this gratuity slab
fractionofapplicable_earnings	Fraction of Applicable Earnings	Float	✓	-	Gratuity calculation fraction applied to eligible earnings

Total End of Service Amount (Total end of service amount)

Field Name	Label	Type	Required	Options	Description
from_year	From (Year)	Int	✓	-	Starting service year for end of service calculation.
to_year	To (Year)	Int	✓	-	Ending service year for end of service calculation.
theamountduefromthetotalendofservice	The amount due from the total end of service	Float	✓	-	Payable amount from total end of service entitlement.
equalbasedon	Equal Based On	Select		From (Year), To (Year), Both, None	Basis for equal distribution across selected service years.

Permissions

Role	Read	Write	Create	Delete	Submit	Cancel
HR User	✓	✓	✓	✓
HR Manager	✓	✓	✓	✓

DocType	Relationship	Module
Gratuity	Linked from	Payroll