How to Calculate Gratuity in CrmLeaf
All editions. Requires the Payroll add-on module to be enabled for your account by an Administrator. Gratuity rules differ by country; CrmLeaf's gratuity calculation covers India and the Gulf Cooperation…
Availability: All editions. Requires the Payroll add-on module to be enabled for your account by an Administrator. Gratuity rules differ by country; CrmLeaf's gratuity calculation covers India and the Gulf Cooperation Council countries.
Overview
Gratuity, also called end-of-service benefit or indemnity depending on the country, is an amount payable to an employee based on length of service. CrmLeaf handles Gratuity as a statutory item and provides a gratuity calculation for India and Gulf Cooperation Council rules. It is normally used when an employee leaves, as part of a full and final settlement, and for provisioning.
How It Works
Gratuity is calculated from an employee's service period and the salary basis the applicable law specifies. The result feeds the full and final settlement and the organisation's payroll records.
Confirm rules → Select employee → Calculate gratuity → Include in settlement → Record and report
- Gratuity is treated as a statutory item within payroll, alongside tax deducted at source, Provident Fund, Employees' State Insurance and Professional Tax.
- The calculation depends on the country's rule, the employee's service period and the salary base that rule uses, which is usually last basic salary rather than gross pay.
- The result is used in a full and final settlement when an employee exits.
- Because rules differ by country, confirm which rule applies to each employee before calculating.
Who Can Use This Feature?
Administrator
- Calculate gratuity for an employee.
- Confirm the applicable country rule and salary base before calculating.
- Include the calculated amount in a full and final settlement.
This functionality is available only to Administrators.
Prerequisites
- The Payroll add-on module enabled for your account and your role.
- An employee record with accurate joining date and, where applicable, exit date.
- An active salary record, so the salary base for the calculation is available.
- The gratuity rule for the employee's country of employment confirmed with a qualified compliance advisor.
For Administrators
Step 1: Confirm the applicable rule
What to do: Establish which country's rule applies to the employee and what salary base it uses. The documented reference points are set out in the table below.
What to verify: Your understanding of the rule is confirmed in writing by a qualified compliance advisor, and is current.
Step 2: Check the employee's service dates and salary
What to do: Confirm the joining date, and the exit date where the employee is leaving. Then open Payroll → Employee Salary and confirm the current salary record, including which component represents basic pay.
What to verify: Service dates are correct, since the whole calculation depends on them.
Step 3: Open the gratuity calculation
What to do: Open the gratuity calculation and select the employee.
What to verify: The employee's service period shown reflects the joining and exit dates on the employee record.
Step 4: Calculate and review the amount
What to do: Run the calculation, then check the result against a manual calculation using the rule you confirmed in step 1.
What to verify: The salary base used is the one the rule requires, and the treatment of service beyond five years is correct where the rule changes at that point.
Step 5: Use the amount in the settlement
What to do: Include the calculated gratuity in the employee's full and final settlement, along with the other amounts due.
What to verify: The settlement total is reviewed and approved by your finance function before payment.
Documented Country Rules
These are documented reference points for CrmLeaf's target markets, provided so you know what to confirm. They are not advice.
| Country | Documented end-of-service rule |
|---|---|
| United Arab Emirates | 21 working days' pay per year of service for the first five years, and 30 working days' pay per year thereafter, based on the last basic salary. Employment is governed by Federal Decree-Law No. 33 of 2021. |
| Saudi Arabia | Half a month's pay per year of service for the first five years, and one month's pay per year thereafter, under Article 84 of the Saudi Labour Law. |
| Qatar | A minimum of three weeks' basic salary per year of service, under Article 54 of the Labour Law (Law No. 14 of 2004). |
| Kuwait | Indemnity of 15 days' pay per year of service for the first five years, and one month's pay per year thereafter, under Law No. 6 of 2010. |
| India | Gratuity is handled as a statutory payroll item. Confirm the applicable statutory formula, eligibility service period and any ceiling with a qualified compliance advisor. |
| Bahrain | Employment is governed by Law No. 36 of 2012. Confirm the applicable end-of-service entitlement with a qualified compliance advisor. |
Expected Result
A gratuity amount is calculated for the employee from their service period and salary base, and is available to include in their full and final settlement.
Important Notes
- Menu names and their position can differ between product editions and can be customised for your account, so your sidebar may not match these paths exactly. Use Search or your Quick Access items if you cannot find a screen.
- Payroll is a paid add-on module. Confirm it is included in your plan.
- Gratuity and end-of-service entitlements, the salary base used, eligibility periods and any ceilings are set by the relevant government authorities and employment laws, change over time, and must be confirmed with a qualified compliance advisor before a live payroll run or a settlement payment.
- Most Gulf Cooperation Council rules use last basic salary, not gross pay. Confirm which component in your salary structure represents basic pay.
- Several rules change after five years of service. Check the service period carefully where an employee is close to that boundary.
- This article is documentation, not tax or legal advice. Obtain advice from a qualified professional in the relevant jurisdiction.
Common Scenarios
Example: an exit after seven years in the United Arab Emirates. The Administrator confirms with the organisation's advisor that the first five years accrue at 21 working days per year and the remaining service at 30 working days per year, on last basic salary, then verifies the calculated figure against that rule before the settlement is approved.
Example: provisioning at year end. An organisation calculates gratuity liability for current employees to support its accounting provision, without an exit being involved.
Troubleshooting
| Issue | Possible Cause | Resolution |
|---|---|---|
| The calculated amount looks too low or too high | The service dates or the salary base are wrong for the applicable rule | Correct the joining or exit date and confirm the basic pay component, then calculate again. |
| Gratuity cannot be calculated for an employee | The employee has no active salary record, or the joining date is missing | Complete the employee record and assign a salary structure, then calculate again. |
| The result does not match the country rule you expect | A different rule or salary base is being applied | Confirm the applicable rule with your compliance advisor and check the values used in the calculation. |
| The gratuity screen is not available | The Payroll module or the required role access is missing | Ask your Administrator to enable the module for your role. |
Frequently Asked Questions
Does CrmLeaf apply the correct country rule automatically?
Confirm which rule the calculation applies for your account with your Administrator, and always verify the result against the rule your compliance advisor has confirmed.
Is gratuity part of monthly payroll?
Gratuity is a statutory item handled by payroll, and is normally paid as part of a full and final settlement when an employee leaves.
Which salary is gratuity based on?
That depends on the applicable law. Several documented Gulf Cooperation Council rules use the last basic salary rather than gross pay.
Can I calculate gratuity for an employee who has not left?
A calculation can be run to understand liability. Payment normally arises on exit under the applicable law.
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