How is gratuity calculated in Sri Lanka?

Gratuity = (Last drawn basic monthly salary + cost of living/fixed allowances) ÷ 2 Ã— completed years of service.

Within what period must employers pay gratuity in Sri Lanka?

Employers are legally required to pay the gratuity within 30 days of the employee's termination or resignation, after which statutory surcharge penalties apply.

Gratuity Calculator — Sri Lanka

Q: Who is eligible for gratuity in Sri Lanka?

Under the Payment of Gratuity Act No. 12 of 1983, an employee who completes 5 or more continuous years of service in an establishment with 15 or more employees is entitled to gratuity upon resignation, termination, or retirement.

Calculate your gratuity entitlement under the Gratuity Act No. 12 of 1983 (Sri Lanka). Applicable after 5 years of continuous service.

Employment Details

Law: Act No. 12 of 1983 (Active in 2026)

Statutory Entitlement: Half-month last drawn salary for each completed year of service, payable once an employee completes the 5-year eligibility threshold (in establishments with 15+ employees).

Last Drawn Monthly Salary (LKR)

Completed Years of Service (Min 5)

Additional Months (Optional / Collective Agreement) Under the Gratuity Act, the statutory minimum covers completed years. Additional months are included if your company contract provides pro-rata service.

What is Gratuity in Sri Lanka?

In Sri Lanka, the Payment of Gratuity Act No. 12 of 1983 mandates that employers provide a lump-sum financial reward to their employees at the end of their service. This payment is called "Gratuity" and it serves as a long-term retirement or resignation benefit to recognize an employee's loyalty and continuous service.

Who is Eligible for Gratuity?

Unlike EPF/ETF which applies from day one, Gratuity has specific eligibility criteria under Sri Lankan labor laws:

Continuous Service Threshold: The employee must have worked for the same employer for a minimum period of 5 continuous years. Once qualified, gratuity is calculated for all completed years from day one.
Company Size: The employer or company must have engaged a workforce of 15 or more employees on any day during the 12-month period preceding the termination of the employee's services.
Termination Reason: Gratuity is payable whether the employee resigns voluntarily, is terminated, retires, or passes away (payable to heirs).
30-Day Payment Rule: Employers are legally required to disburse the gratuity within 30 days of service termination to prevent statutory interest surcharges.

How is the Gratuity Payment Calculated?

The standard formula for calculation in Sri Lanka is straightforward:

(Last Drawn Monthly Salary ÷ 2) Ã— Total Completed Years of Service

Important note on "Salary": For gratuity purposes, "salary" means the basic salary or wage plus any cost-of-living allowances, piece-rate wages, or consolidated wage. It does not include discretionary bonuses, overtime pay, or traveling allowances.

Why Use Our Calculator?

Calculating exact entitlements can be tedious. Our Free Gratuity Calculator automates the formula according to Sri Lankan law, allowing you to instantly figure out your expected payout upon resignation.

Frequently Asked Questions

Who is eligible for gratuity in Sri Lanka?

Under the Payment of Gratuity Act No. 12 of 1983, any employee who has completed a minimum of 5 years of uninterrupted service in a company that has 15 or more employees is legally entitled to receive a gratuity payment upon resignation or retirement.

How is gratuity calculated?

Gratuity is calculated as half a month's salary (last drawn basic salary plus any consolidated allowances) multiplied by the total number of completed years of service.

Is gratuity taxable in Sri Lanka?

Under the Inland Revenue Act No. 24 of 2017, statutory terminal benefits like gratuity are subject to special concessionary terminal tax rates rather than standard monthly APIT withholding, and enjoy substantial exemption limits (such as up to LKR 10 million under approved retirement funds). Consult your company accountant or tax advisor for individual terminal tax filing.