Gratuity Calculator Bangladesh

Gratuity is a statutory end-of-service benefit payable by an employer to an employee as recognition of long and faithful service. Under Section 27 of the Bangladesh Labour Act 2006, every worker who has completed at least 5 years of continuous service in an establishment is entitled to gratuity on separation — whether due to resignation, retirement, retrenchment, or death. The calculation is based on the last drawn basic salary and completed years of service. Gratuity is separate from provident fund, leave encashment, or any contractual bonus — it is a legal entitlement, not a discretionary payment.

Under the Bangladesh Labour Act 2006, there are two categories: Confirmed (permanent) employees who have completed minimum 5 years of continuous service are entitled to 30 days' basic salary per completed year. Unconfirmed (temporary, contractual, or probationary) employees are entitled to 14 days' basic salary per completed year, with no minimum service requirement — even 1 or 2 years qualifies. Note: The 5-year minimum only applies to confirmed employees. If you are on a temporary or project-based contract, you may still claim gratuity from day one of separation after any amount of service.

The formula under Bangladesh Labour Act 2006 Section 27 is: For confirmed employees: Gratuity = (Last Basic Salary ÷ 30) × 30 × Completed Years = Last Basic Salary × Completed Years. For unconfirmed employees: Gratuity = (Last Basic Salary ÷ 30) × 14 × Completed Years. Only the basic salary is used — house rent allowance (HRA), medical, transport, food, or other allowances are excluded. Only completed years count; partial years (remaining months) are disregarded. Example: An employee with a basic salary of ৳30,000 and 8 years 7 months of confirmed service: Gratuity = ৳30,000 × 8 = ৳2,40,000.

Under current NBR (National Board of Revenue) rules, gratuity received from an employer is partially tax-exempt. Gratuity paid from an approved gratuity fund (registered with NBR) is fully exempt up to ৳2.5 crore. Gratuity paid directly by the employer (without an approved fund) is tax-exempt up to ৳4.75 lakh under the general income tax exemption limit for retired persons. Any amount above the applicable exemption is added to the employee's taxable income for that year and taxed at their applicable slab rate. Always consult a chartered accountant or income tax practitioner for your specific situation, especially for large gratuity amounts.

No — gratuity is a statutory right under the Bangladesh Labour Act 2006. An employer cannot legally refuse gratuity to an eligible employee. The only exception is Section 26 of the Act: if an employee is dismissed from service for a specific type of misconduct that caused financial loss to the employer, gratuity may be forfeited to the extent of the proven loss. Mere resignation or voluntary separation does not forfeit gratuity. If an employer refuses payment, the employee can file a complaint with the Labour Court or the Department of Inspection for Factories and Establishments (DIFE). Courts consistently uphold workers' gratuity rights.

Under the Bangladesh Labour Act 2006, gratuity must be paid within 30 days of the worker's separation from employment. If the employer fails to pay within this period, the worker can claim interest on the delayed amount. In practice, larger companies with established HR departments typically settle gratuity with the final settlement. Smaller establishments may delay — workers should formally request gratuity in writing upon resignation and keep a copy. If not settled within 30 days, a written notice to the employer and then a complaint to the Labour Court is the legal recourse.

There is no mandatory requirement under the Bangladesh Labour Act 2006 for employers to maintain a separate gratuity fund — they can pay from operating funds. However, many large companies and all publicly listed companies maintain approved gratuity funds because: (1) NBR provides corporate tax deductions on gratuity fund contributions, (2) it creates a visible financial provision on the balance sheet, (3) it ensures funds are available when multiple employees separate simultaneously. Employees at companies with approved gratuity funds get additional protection — if the company faces financial difficulty, the fund is ring-fenced. Ask your HR department whether your company has an approved gratuity fund.

Provident Fund (PF) and Gratuity serve different purposes. PF is a defined-contribution retirement savings scheme where both employer and employee contribute a fixed percentage of salary monthly throughout employment — the employee gets their own contributions back plus employer contributions and interest. Gratuity is a pure employer-funded end-of-service benefit calculated on last salary and years of service — employees contribute nothing. Both are payable on separation. Many BD companies offer both, some offer only one. A company may have an approved PF (with NBR registration) but no gratuity fund, or vice versa. Check your appointment letter and HR policy carefully.