Gratuity Calculator Sri Lanka

Use the most accurate online Gratuity Calculator for Sri Lanka to quickly estimate the lump-sum payment you are legally entitled to upon termination of employment.

The Sri Lanka Gratuity Payment Estimator – 2025

To calculate your estimated gratuity, enter your total completed years of service and your last drawn base salary, including eligible allowances, as defined by the law.

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Enter values and press Calculate.

Input Field	Description
Completed Years of Service	Enter the total number of full, completed years you served. (Note: Partial years are generally not counted for the calculation, only for eligibility.)
Last Drawn Gratuity Base Salary (LKR)	Enter your last drawn monthly “Base Salary for Gratuity” (Basic/Combined Salary + Mandatory Allowances).

DISCLAIMER: This calculator provides an estimate based on Sri Lankan labor law. For specific legal advice, please consult with a legal professional.

Gratuity in Sri Lanka: Law, Eligibility, and Calculation

Gratuity is a mandatory, one-time payment made by an employer to an employee for their dedicated service, as required by Sri Lankan labour law. This payment is primarily governed by the Payment of Gratuity Act, No. 12 of 1983.

Who is Eligible for Gratuity in Sri Lanka?

To be legally entitled to a gratuity payment under the Act, an employee must meet two main conditions:

Service Requirement: You must have completed a minimum of five (5) years of continuous service under the same employer.
Employer Size: The establishment must have employed 15 or more employees during the 12 months preceding the date of layoff or termination.

How to calculate gratuity in Sri Lanka

The Gratuity Calculation Formula

For monthly-paid employees, the Payment of Gratuity Act provides a clear formula based on the last drawn salary and the length of service.

The calculation uses the completed years of service and the Base Salary for Gratuity.

Formula for Monthly Paid Employees:

Gratuity = (Base Salary for Gratuity / 2) × Completed Years of Service

Defining the “Base Salary for Gratuity”

This is the most crucial part of the calculation. The Base Salary for Gratuity is defined as:

Base Salary=Last Drawn Basic Salary/Remuneration+Eligible Allowances

Eligible Allowances typically include the living allowance, special living allowance, or other similar allowances, specifically those provided under the Budgetary Relief Allowance Acts (e.g., No. 36 of 2005 and No. 4 of 2016). It is not always the gross salary.

Taxation and Payment Deadline

Taxation on Gratuity

Gratuity payments are generally subject to income tax under the Inland Revenue Act. However, a significant tax relief is provided:

The first LKR 5 million (Rs. 5,000,000) of the gratuity payment is tax-exempt.
Any amount exceeding the LKR 5 million limit is subject to a tax rate of 12%.

Payment Deadline

Employers are legally obligated to pay the gratuity to the eligible employee within 30 days of the date of termination or retirement. Failure to comply can result in penalties against the employer.

What is the difference between Gratuity and EPF/ETF?

Gratuity is an employer-funded lump-sum payment (no employee contribution) based on service, governed by the Payment of Gratuity Act. EPF (Employees’ Provident Fund) and ETF (Employees’ Trust Fund) are statutory funds that involve monthly contributions from both the employer and the employee (EPF) or solely from the employer (ETF).

Does a partial year of service count for the calculation?

No. Under the current law for monthly-paid employees, the gratuity is calculated based only on the number of completed years of service. For example, 9 years and 11 months are treated as 9 years for the purpose of the payment calculation.

If I resign after 4 years and 11 months, am I eligible?

No. You must complete a minimum of five years of continuous service to be eligible for the gratuity payment, except in cases of death, disability, or ill health retirement.

How long does the employer have to pay the gratuity?

The employer must pay the gratuity to the employee within 30 days of the employee’s termination date.

More details here. Source: Ada Derana Education