Restaurant staff gratuity calculator (India)
Calculate gratuity payable per employee under the Payment of Gratuity Act 1972. Formula: (15 × last Basic+DA × completed years of service) ÷ 26. Handles the 5-year minimum service requirement, the 6-month rounding rule, and the ₹20 lakh tax-exempt ceiling. Add multiple employees for settlement or use provision planning mode to see total gratuity liability and monthly provision for your P&L. Print A4 statement or export CSV for your CA. Saves in browser. No signup.
Gratuity in Indian restaurant operations
The Payment of Gratuity Act 1972 applies to any establishment employing 10 or more persons (and continues to apply even if headcount falls below 10 subsequently). For most restaurants — from casual dining to QSR to cloud kitchens — gratuity is a statutory obligation, not a discretionary benefit.
The act requires payment within 30 days of the last working date. Delayed payments attract interest at the rate notified by the Central Government. In practice, many restaurant operators treat gratuity as a cash obligation that appears only at separation — which causes cash flow problems when multiple long-tenure employees leave around the same time (not uncommon after a chef team transition or outlet closure). Provisioning monthly eliminates this.
The 6-month rounding rule
Under the Act, if an employee has served for 5 years and 7 months, the 7 months (≥ 6) rounds up to a full year — so gratuity is calculated for 6 years, not 5. At 5 years and 4 months, it rounds down to 5 years. This rounding can make a material difference: for an employee on ₹25,000 Basic+DA, the difference between 5 and 6 years is ₹25,000 × 15 ÷ 26 = ₹14,423.
What counts as Basic+DA
For gratuity calculation, only Basic salary + Dearness Allowance is included. HRA, food allowance, conveyance, performance bonus, overtime pay and other allowances are excluded. Most Indian restaurant payrolls do not have a formal DA component — in that case, use the Basic salary alone. If an employee's CTC is structured as a flat "consolidated salary" with no explicit components, consult your CA on how to apportion it for gratuity purposes — the department has historically accepted the full consolidated salary as the base in such cases.
Gratuity provisioning in the P&L
For restaurants filing accounts under the Companies Act or for tax audit purposes, gratuity is a contingent liability that should be provisioned in the P&L as it accrues. The simplest approach: monthly provision = total current gratuity liability ÷ 12 (annualised). A more actuarially accurate approach uses remaining service estimates — your CA can set this up under AS 15 if your establishment is large enough to require it.
Where this fits
- Salary slip generator — the Basic+DA figure from each salary slip is the input to this gratuity calculator; keep your salary slip records to audit the last drawn salary at separation
- Overtime calculator — overtime pay is excluded from the gratuity base; this tool separates Basic+DA from overtime so you use the right figure here
- Monthly P&L statement — include the monthly gratuity provision (total liability ÷ 12) as a line item under Labour Cost in your P&L; treating it as a lump-sum at separation distorts monthly profitability
- Attendance register / muster roll — continuous service records from the muster roll are the evidence needed to defend a gratuity claim if disputed
- P3 — Payroll pillar — all articles on Indian restaurant payroll: EPF, ESI, salary structuring, gratuity, and labour law compliance