Gratuity Rule in Frappe HR: Defining How Gratuity Is Calculated
A Gratuity Rule defines how an employee’s gratuity is calculated the fraction of salary earned per year of service, the minimum tenure required, and which earnings count. It encodes your gratuity policy (often set by local law) once, so every gratuity payout is computed consistently and correctly.
You will find it under Home > Human Resources > Payroll > Gratuity Rule.
BEFORE YOU START
Know the gratuity rules that apply in your jurisdiction the per-year fraction, the minimum years of service, and which salary components are counted as these are usually defined by law.
How to create a Gratuity Rule
- Open the Gratuity Rule list and click New.
- Enter a name for the rule.
- Set how the gratuity amount is calculated and the Work Experience Calculation Method for example, rounding the tenure or counting only completed years.
- Set the Minimum Year for Gratuity (the service threshold to qualify).
- In the slabs table, define the fraction of applicable earnings per year band of service.
- Specify which salary components count as applicable earnings, then Save.
How the rule shapes the calculation
The rule’s pieces work together: the slabs and fractions decide how much of the applicable salary is earned for each year of service, the experience method decides how tenure is counted, and the minimum-years threshold decides who qualifies at all. Get these right and a gratuity payout is just a matter of applying the rule to an employee’s tenure and salary.
TIP
Confirm the rule against your local labour law and have it reviewed by finance or compliance. Gratuity is a statutory entitlement in many places, so the fraction, threshold, and applicable earnings must match the legal formula exactly.
Related Topics
- Gratuity
- Salary Component
- Employee Separation
- Salary Slip
SUMMARY
A Gratuity Rule defines how gratuity is calculated the fraction of applicable earnings per year of service, how tenure is counted, the minimum qualifying years, and which salary components count. Create it with a name, a calculation method, a minimum-year threshold, slabs with fractions, and the applicable earning components. The rule is then applied to an employee’s tenure and salary to compute their gratuity. Because gratuity is often statutory, confirm the rule against local law.
