✏️ Your Details

💰 Your Results

Estimated Gratuity$0
Years of Service0 years
Weeks of Pay0 weeks
Weekly Base Pay$0

Examples

ScenarioYears of ServiceGratuity / SeveranceWeekly Pay Equivalent
$60,000 / 5 yr / 1 week per year (2%)5.0$6,0005.2 weeks
$85,000 / 8 yr 6 mo / 4% schedule8.5$28,90017.7 weeks
$120,000 / 12 yr / 1 month per year (8.3%)12.0$119,52051.8 weeks
$45,000 / 3 yr / 1 week per year (2%)3.0$2,7003.1 weeks

Every row uses the same schedule the calculator applies: Gratuity = Annual Salary × Schedule% × Years of Service, where the schedule percentage is what one week of pay per year works out to (2%). US gratuity is voluntary in most states, so this is an estimate of what an employer’s written policy would pay.

Formula & Guide

Gratuity = Annual Salary × (Schedule %) × Years of Service
Schedule % = weeks of pay per year of service ÷ 52 × 100

How to use this calculator

  1. Enter your annual base salary.
  2. Enter your full years of service and any extra months.
  3. Enter the severance schedule your employer policy states — as a percentage of annual salary per year worked (1 week per year = 2%; 1 month per year = 8.3%).
  4. Press Calculate to see your estimated gratuity and how many weeks of pay it equals.

Common severance schedules

Policy wording% of annual salary per year
1 week of pay per year of service2%
2 weeks of pay per year of service4%
1 month of pay per year of service8.3%
2 months of pay per year of service16.7%

US legal context

The United States has no statutory gratuity. The Worker Adjustment and Retraining Notification (WARN) Act guarantees notice — 60 days for a plant closing or mass layoff at covered employers — not severance pay. Outside WARN, severance is whatever the employment contract, employee handbook or negotiated separation agreement provides. Some states (notably New Jersey for certain layoffs) mandate severance separately. Common market practice ranges from 1–2 weeks of pay per year of service for nonexempt staff to 2–4 weeks per year for executives, often with a floor of 4–8 weeks.

What Gratuity Actually Is

"Gratuity" is a single lump-sum payment made when employment ends, calculated from an employee’s tenure and pay. In many countries the term is a legal entitlement, but in the United States it is a voluntary benefit that appears in an employer’s written severance policy or a negotiated separation agreement. That distinction matters: there is no federal law that obligates a US employer to pay gratuity, so the schedule — not a statute — is what determines your number.

Where verifiable severance rules do exist

Who uses gratuity calculators

Laid-off employees checking an offer against the written policy; HR and finance teams budgeting a reduction in force; and employees negotiating a voluntary separation package who need a defensible baseline before they counter.

What the number does not include

A gratuity estimate covers base salary only. It typically excludes accrued but unused paid time off (often paid out separately by state law), the value of unvested equity, bonus proration, and COBRA subsidy. Those are usually negotiated as separate line items, so treat the calculator output as the salary-based core of the package, not the whole offer.

Frequently Asked Questions

What is gratuity and is it legally required?
Gratuity is a lump-sum payment an employer makes when an employee leaves, typically after long service. In the United States there is no federal law requiring severance or gratuity pay; it is a matter of company policy, an employment contract, or a collective bargaining agreement.
How is gratuity usually calculated?
The most common formula is a multiple of weekly pay per year of service, for example one week of pay for every year worked. Some employers use one month's pay per year, and others blend a base with additional service credits.
Is gratuity taxable?
Yes. Gratuity or severance paid in cash is generally treated as ordinary wage income and is subject to federal income tax, Social Security and Medicare taxes. A portion may qualify for special treatment only if it is paid under a qualified plan, which is rare.
Does unused vacation or PTO count toward gratuity?
Usually not. Gratuity is based on wages and service, while accrued vacation is typically paid out separately under state law. Treat them as two line items, not one combined figure.
What if I am laid off rather than resigning?
A layoff often triggers a severance policy that a voluntary resignation does not. Check whether the employer's policy or your contract conditions payment on the reason for separation, since many policies pay only for involuntary terminations.

⚠️ Important: Gratuity and severance are not federally mandated in the United States. This estimate applies the schedule you enter and is not a legal entitlement or a guarantee of payment. Consult an employment attorney or your HR department to confirm what your policy or contract requires.