{"id":295589,"date":"2023-06-26T11:56:54","date_gmt":"2023-06-26T10:56:54","guid":{"rendered":"https:\/\/nigerianfinder.com\/?p=295589"},"modified":"2023-06-26T11:56:54","modified_gmt":"2023-06-26T10:56:54","slug":"how-to-calculate-gratuity-for-private-sector-employees-in-nigeria","status":"publish","type":"post","link":"https:\/\/nigerianfinder.com\/how-to-calculate-gratuity-for-private-sector-employees-in-nigeria\/","title":{"rendered":"How to Calculate Gratuity for Private Sector Employees in Nigeria\u00a0"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Employees across the globe are usually paid gratuities by their employers when they retire or resign from an organization they worked for years. But in Nigeria, not all organizations in the private sector pay gratuities to their employees since it isn&#8217;t obligatory to do so. Those private sector employees that work in organizations that pay gratuities should know how to calculate what to expect as gratuity payment. For this reason, this article aims to explain how private-sector employees in Nigeria can calculate gratuity. In addition, we&#8217;d also discuss the eligibility criteria and the factors that affect gratuity calculation in Nigeria.\u00a0\u00a0<\/span><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-295590\" src=\"https:\/\/nigerianfinder.com\/wp-content\/uploads\/2023\/06\/How-to-Calculate-Gratuity-for-Private-Sector-Employees-in-Nigeria-.jpg\" alt=\"How to Calculate Gratuity for Private Sector Employees in Nigeria\u00a0\" width=\"736\" height=\"344\" srcset=\"https:\/\/nigerianfinder.com\/wp-content\/uploads\/2023\/06\/How-to-Calculate-Gratuity-for-Private-Sector-Employees-in-Nigeria-.jpg 736w, https:\/\/nigerianfinder.com\/wp-content\/uploads\/2023\/06\/How-to-Calculate-Gratuity-for-Private-Sector-Employees-in-Nigeria--600x280.jpg 600w\" sizes=\"(max-width: 736px) 100vw, 736px\" \/><\/p>\n<p><span style=\"font-weight: 400;\">How to calculate gratuity for private sector employees in Nigeria would be discussed below:\u00a0<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\">\n<h2><span style=\"font-weight: 400;\">What Does Gratuity Mean?\u00a0<\/span><\/h2>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Before we proceed to explain how private sector employees in Nigeria can calculate what their expected gratuity would be, we should first discuss what gratuity means. Gratuity is a lump sum of money that employees of public private institutions in Nigeria, get from their employers after working in an organization for years.\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The Pension Reform Act, 2014, is the legislation that governs gratuity in Nigeria. Although employees of public institutions in Nigeria are entitled to receive gratuities when they retire or resign after working for years with an institution, only some private institutions in Nigeria do so. So, employees in the private sector should ensure they know the terms and conditions surrounding their appointment during salary negotiation.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">There are two main reasons why employees are paid gratuities when they retire or resign from the positions they held. One of the reasons employees are paid gratuities by their employers is to appreciate their contributions to the growth of their organization. Secondly, gratuities are paid to help employees by their employers as a means of supporting their future endeavours, especially when they retire.\u00a0<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\">\n<h2><span style=\"font-weight: 400;\">What is the Eligibility Criteria for Gratuity Payment for Private Sector Employees in Nigeria?<\/span><\/h2>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">As we stated earlier, not all private institutions in Nigeria pay their workers gratuity when they retire or resign from active employment because gratuity isn&#8217;t obligatory. For this reason, it is pertinent employees in the private sector in Nigeria understand the details of their contract agreement to ascertain if they get to receive gratuities when they retire or resign.\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Now that we&#8217;ve established that only some private sector employees in Nigeria are paid gratuity when they retire or resign, let&#8217;s discuss what makes an employee eligible for gratuity payment in Nigeria. In the following paragraphs, we will be explaining the eligibility criteria for gratuity in Nigeria.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">One of the major criteria that make private sector employees eligible for gratuity in Nigeria is having worked in an establishment for the required minimum amount of time. Although the required minimum amount that qualifies employees for gratuity in the private sector in Nigeria varies, five years is normally the minimum duration of time one has to serve an organization to be eligible for gratuity.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Another criterion an employee in the private sector must satisfy to qualify for gratuity is that they must have retired from their position or have given their notice of resignation. Depending on the organization or industry, employees may retire after twenty-five years, others thirty years, and sometimes after forty years in service.\u00a0\u00a0\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The third criterion that qualifies an employee for gratuity is in the event of termination of employment due to death or disability on the job. However, in such situations as described above, the employee must have satisfied the required minimum amount of time working to qualify for gratuity for such an establishment.\u00a0<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\">\n<h2><span style=\"font-weight: 400;\">What Factors Affect Gratuity Calculation for Private Sector Employees in Nigeria?\u00a0<\/span><\/h2>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">In this section of the article, we&#8217;ll be discussing the factors that affect gratuity calculation for private-sector employees in Nigeria. The first factor is the number of years an employee worked in an establishment before resigning or retiring. An employee that worked for 25 years in a company would receive a gratuity more than another employee that worked in that same organisation for 20 years (as long as their base wage was equal).\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Another important factor affecting the calculation of gratuity is the base wage of the employee during the period he worked with the organization. If both employees worked for a private organisation for 25 years before retirement and one earned N450,000 a month and another was being paid N300,000 a month, the gratuity for the first employee would be more than that of the second.\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Other important factors that determine the amount of gratuity a private sector employee would get after resignation or retirement include the age at which an employee resigned or retire, and the pension plan an employee is enrolled in. The contribution of the employer towards the employee&#8217;s gratuity and how long the employer contributed towards it are additional factors that affect gratuity calculation for private sector employees in Nigeria.\u00a0<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\">\n<h2><span style=\"font-weight: 400;\">How to Calculate Gratuity for Private Sector Employees in Nigeria\u00a0<\/span><\/h2>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Now to the crux of the article, let&#8217;s explain how private sector employees in Nigeria can calculate what to expect as a gratuity from their employers when they retire or resign.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The formula for calculating gratuity for private sector employees in Nigeria is as follows:\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Gratuity = n\u00d7b\u00d715\/26<\/span><\/p>\n<p><span style=\"font-weight: 400;\">where n = tenure of service completed in the organization\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">b = last drawn basic salary + dearness allowance<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Therefore, Gratuity = (Basic Wage + Dearness Allowance) \u00d7 Years of Service \u00d7 15\/26\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Now that all the parameters have been sorted out, let&#8217;s hypothetically calculate the gratuity of Mr. Caleb, an engineer that worked for 30 years for A.B &amp; Sons Engineering Limited, during which he was paid a monthly pay of N450,000 and a monthly dearness allowance of N40,000.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Gratuity = (450,000 + 40,000) \u00d7 30 \u00d7 15\/26\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Gratuity = 490,000 \u00d7 30 \u00d7 15\/26<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Gratuity = 8,480,769\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">According to the calculation above, Mr. Caleb is entitled to receive N8,480,769 as gratuity. However, it is worthy of note that the calculation for gratuity may vary according to the terms of the employee&#8217;s contract and the employer&#8217;s policy.\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Employees across the globe are usually paid gratuities by their employers when they retire or resign from an organization they &#8230; <\/p>\n<p class=\"read-more-container\"><a title=\"How to Calculate Gratuity for Private Sector Employees in Nigeria\u00a0\" class=\"read-more button\" href=\"https:\/\/nigerianfinder.com\/how-to-calculate-gratuity-for-private-sector-employees-in-nigeria\/#more-295589\" aria-label=\"More on How to Calculate Gratuity for Private Sector Employees in Nigeria\u00a0\">Read more<\/a><\/p>\n","protected":false},"author":2534,"featured_media":295590,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3093],"tags":[],"jetpack_sharing_enabled":true,"jetpack_featured_media_url":"https:\/\/nigerianfinder.com\/wp-content\/uploads\/2023\/06\/How-to-Calculate-Gratuity-for-Private-Sector-Employees-in-Nigeria-.jpg","jetpack_shortlink":"https:\/\/wp.me\/p6w1sx-1eTz","jetpack-related-posts":[],"_links":{"self":[{"href":"https:\/\/nigerianfinder.com\/wp-json\/wp\/v2\/posts\/295589"}],"collection":[{"href":"https:\/\/nigerianfinder.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/nigerianfinder.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/nigerianfinder.com\/wp-json\/wp\/v2\/users\/2534"}],"replies":[{"embeddable":true,"href":"https:\/\/nigerianfinder.com\/wp-json\/wp\/v2\/comments?post=295589"}],"version-history":[{"count":1,"href":"https:\/\/nigerianfinder.com\/wp-json\/wp\/v2\/posts\/295589\/revisions"}],"predecessor-version":[{"id":295591,"href":"https:\/\/nigerianfinder.com\/wp-json\/wp\/v2\/posts\/295589\/revisions\/295591"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/nigerianfinder.com\/wp-json\/wp\/v2\/media\/295590"}],"wp:attachment":[{"href":"https:\/\/nigerianfinder.com\/wp-json\/wp\/v2\/media?parent=295589"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/nigerianfinder.com\/wp-json\/wp\/v2\/categories?post=295589"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/nigerianfinder.com\/wp-json\/wp\/v2\/tags?post=295589"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}