When people plan a job switch, they usually focus on three things:
new salary, notice period, and joining bonus.
What almost no one calculates is the money they’re leaving behind.
Gratuity and leave encashment don’t sound exciting. They don’t show up in your monthly salary. But when you resign, these two components can add up to lakhs of rupees—or zero, if you exit without planning.
In 2026, with frequent job hopping and updated labour rules, understanding gratuity has become more important than ever.
Gratuity: The Deferred Pay Most Employees Ignore
Gratuity is a statutory benefit paid by an employer as a reward for long-term service. Think of it as a loyalty bonus, not a favor.
The problem?
Most employees don’t even check whether they’re eligible before resigning.
What Changed Recently?
Traditionally, gratuity eligibility was tied to 5 years of continuous service. In practice, courts have interpreted this as 4 years and 240 days, which effectively qualifies you if you’re close to completing 5 years.
However, under the new labour code framework implemented in 2025, an important change was introduced:
✅ New Rule (Important for 2026 Job Switchers)
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Fixed-term and contract employees are now eligible for gratuity after just 1 year of service
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Permanent employees generally still follow the 5-year rule
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This is a big win for professionals on contracts, project roles, or fixed-term employment
If you’re switching jobs frequently, this rule alone could decide when you resign.
How Gratuity Is Calculated (Simple Formula)
Gratuity is not arbitrary. It follows a clear statutory formula.
Gratuity Formula
Where:
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Last Drawn Salary = Basic Pay + Dearness Allowance
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15 = 15 days’ salary per year of service
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26 = working days in a month for calculation purposes
This formula is the backbone of every gratuity calculator—including the one on GrowCalculators.
Gratuity Calculation Examples (Real Numbers)
Example Table: How Much Gratuity Are You Actually Leaving Behind?
| Years of Service | Last Drawn Salary | Gratuity Payable |
|---|---|---|
| 1 year (Fixed-term) | ₹30,000 | ₹1,73,077 |
| 3 years | ₹40,000 | ₹6,92,308 |
| 5 years | ₹50,000 | ₹14,42,307 |
| 7 years | ₹60,000 | ₹24,23,077 |
| 10 years | ₹80,000 | ₹46,15,385 |
Now imagine resigning 3 months too early and losing this entire amount.
That’s not a small mistake—that’s a financial blind spot.
Is Gratuity Tax-Free?
Yes—mostly.
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Gratuity is tax-free up to ₹20 lakh
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Amounts beyond the limit may be taxable
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For most salaried professionals, gratuity received falls well within the tax-free limit
This is why gratuity is often described as one of the cleanest exit payouts you’ll ever receive.
Leave Encashment: The Other Exit Benefit People Forget
Along with gratuity, your unused earned leaves are usually paid out during your Full & Final settlement.
Unlike gratuity:
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Leave encashment is not always fully tax-free
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Tax treatment depends on employer type and leave balance
Still, it can significantly boost your exit payout.
Example: Leave Encashment Impact
| Unused Leaves | Monthly Salary | Leave Encashment |
|---|---|---|
| 15 days | ₹50,000 | ₹25,000 |
| 30 days | ₹60,000 | ₹60,000 |
| 45 days | ₹80,000 | ₹1,20,000 |
Many employees resign without checking their leave balance—essentially giving up money they’ve already earned.
The Job-Hopping Trap in 2026
Job hopping is common—and often smart—but poor timing can be expensive.
Common mistakes:
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Resigning just months before gratuity eligibility
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Not understanding fixed-term eligibility rules
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Assuming HR will “automatically calculate everything”
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Focusing only on new CTC, not exit benefits
Gratuity isn’t paid if you’re almost eligible. It’s paid only if you cross the threshold.
That’s why planning your resignation date matters.
Why You Should Calculate Gratuity Before You Resign
Instead of guessing, you should know:
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Exactly how much gratuity you’re eligible for
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Whether waiting a few more months makes sense
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How gratuity + leave encashment changes your total exit payout
The GrowCalculators Gratuity Calculator helps you do this in seconds by factoring in:
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Last drawn salary
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Years of service
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Eligibility threshold
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Statutory calculation rules
This allows you to make a timing-based decision, not an emotional one.
Final Thought: Don’t Let “Often Ignored” Benefits Cost You Real Money
Gratuity and leave encashment may not feel exciting—but they are earned money, not bonuses.
In 2026, with changing labour rules and frequent job switches:
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Ignoring gratuity can cost you lakhs
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Understanding eligibility can change your resignation strategy
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A simple calculation can protect years of service value
Before submitting that resignation email:
👉 Use the GrowCalculators Gratuity Calculator to calculate your exact exit payout and make sure you don’t leave your own money on the table.