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Gratuity is one of the largest single payments an employer in Bangladesh ever makes to a departing employee — and one of the most commonly miscalculated. This guide covers who qualifies, the formula the Bangladesh Labour Act 2006 sets out, worked examples in BDT, and how to stop it becoming a cash-flow shock.
Key takeaways
- Gratuity is payable to workers with at least one year of continuous service, under the terms of the Bangladesh Labour Act 2006 and your own service rules.
- The standard entitlement is 30 days'' wages for each completed year of service, rising to 45 days'' wages per year once service reaches 10 years or more.
- "Wages" for gratuity normally means the last drawn basic salary, not gross pay — define this clearly in your service rules.
- Gratuity should be provisioned every month, not found at resignation time.
- Where a recognised gratuity fund exists, payments follow the fund''s trust deed and NBR approval conditions.
Who is entitled to gratuity
Entitlement usually arises on resignation, retirement, termination (other than dismissal for misconduct), redundancy or death in service, once the worker has completed continuous service. Practical rules most Bangladeshi employers apply:
| Situation | Gratuity payable? |
|---|---|
| Resignation after 1+ year | Yes, per service rules |
| Retirement | Yes |
| Termination / retrenchment | Yes |
| Death in service | Yes — paid to nominee |
| Dismissal for proven misconduct | Usually forfeited |
| Exit inside probation | No |
Your service rules or CBA can be more generous than the Act, never less. Whatever you write there becomes enforceable.
The formula
Gratuity = Last drawn basic salary ÷ 30 × Days per year × Completed years
With the statutory day counts:
- Under 10 years of service → 30 days'' basic per completed year (i.e. one month''s basic per year)
- 10 years or more → 45 days'' basic per completed year
Worked example 1 — 6 years of service
Last basic salary ৳40,000, 6 completed years.
- 30 days'' wages = ৳40,000
- Gratuity = ৳40,000 × 6 = ৳2,40,000
Worked example 2 — 12 years of service
Last basic salary ৳60,000, 12 completed years.
- 45 days'' wages = ৳60,000 ÷ 30 × 45 = ৳90,000
- Gratuity = ৳90,000 × 12 = ৳10,80,000
The jump at year ten is steep. A finance team that has not been provisioning will feel it.
Provision monthly, not at exit
Book gratuity as an accruing liability each month:
Monthly provision ≈ Current basic ÷ 12 (for the 30-day tier)
Re-measure the provision whenever basic salary is revised, because the formula uses the last basic, not the average. Employers who run a funded scheme contribute to the gratuity fund instead, which also brings tax treatment benefits — confirm the current position with your auditor and the NBR approval letter for the fund.
Gratuity vs provident fund
They are different obligations and are often confused:
| Gratuity | Provident fund | |
|---|---|---|
| Funded by | Employer only | Employee + employer contribution |
| Basis | Last basic × years | Accumulated contributions + interest |
| Vesting | Service length | Fund rules |
| Typical trigger | Exit / retirement | Exit / retirement |
For the contribution side, see our complete guide to provident fund rules in Bangladesh.
Getting the settlement right
Gratuity is one line of the final settlement. The full exit payout normally includes unpaid salary to the last working day, encashment of unused earned leave, any pro-rated festival bonus, notice pay if applicable, provident fund, and gratuity — less loan or advance recoveries and applicable tax deduction at source.
Document the calculation on the settlement sheet and have the employee counter-sign it. Most disputes come from an undocumented figure, not from the formula.
Automating it
Three things remove almost all of the risk:
- Store date of joining and basic salary history cleanly for every employee.
- Run a gratuity liability report monthly, so finance sees the number growing.
- Compute the settlement from system data at exit rather than from a fresh spreadsheet.
AIHR BD keeps joining dates, salary structure history, leave balances and loan recoveries in one place, so gratuity, leave encashment and final settlement are generated from the same records your payroll already uses — in BDT, with a printable settlement sheet.
Related reading
Frequently asked questions
- Is gratuity mandatory in Bangladesh?
- Gratuity is payable where the Bangladesh Labour Act 2006, your service rules, a collective agreement or the employment contract provides for it. Once your service rules promise gratuity, it becomes enforceable.
- How many years of service are needed for gratuity?
- At least one year of continuous service. The rate rises from 30 days wages per year to 45 days wages per year once service reaches 10 years.
- Is gratuity calculated on basic or gross salary?
- Most Bangladeshi employers calculate on the last drawn basic salary. Define this explicitly in your service rules to avoid disputes.
- Can gratuity be forfeited?
- It is normally forfeited only on dismissal for proven misconduct, following a proper disciplinary process.