Gratuity: How to Calculate Gratuity in Nigeria

Many people get confused about gratuity and pension by thinking they are the same. This article will explain the meaning of gratuity and how you can calculate your gratuity in Nigeria when you stop working officially.

What is Gratuity?

Gratuity is a lump sum of money paid by an employer to an employee to appreciate his years of service with him i.e. an amount paid as an appreciation for the contribution of such staff in the growth of the company over the years spent in the company. Not all employees are qualified for gratuity as it has requirements. It is usually paid after retirement or before then so far the requirements have been met which is to have spent up to 5 or more years in the company.

If an employee should die before spending five years in the company, such gratuity can be paid only to the next of kin which might have been written when filling the form. Also, if an employee should have a fatal accident that has caused disability, such employee will receive gratuity. There is no particular amount stipulated to be paid as gratuity to employees, it all depends on the employer.

Gratuity: How to Calculate Gratuity in Nigeria

How to Calculate Gratuity in Nigeria

Gratuity is a retirement benefit it reward. In Nigeria, it is difficult to get your gratuity most especially civil servants, you would have to wait for many years before getting it. Some even die while trying to get it and yet, that doesn’t mean the next of kin would be paid immediately. The amount to be paid as gratuity depends on some factors such as the years spent in service and it can be calculated as follows:

Gratuity = (basic salary + allowances(house,wardrobe,kitchen etc)× number of years used in service.

For example, if Mr A works with Elkadek company and has been there for 12 years with a basic salary of 320,000, house allowance of 40000, wardrobe allowance of 35000 and transport allowance of 55000. In order to calculate his gratuity, it will be:

= (320,000+(40,000+35,000+55,000)) x 12
= (320,000 + 130,000) x 12
= 450,000 x 12

When this formula is in use, any period over six months will be taken to be one year and also any period lesser than six months, such period will not be put into consideration.

If Miss Jason has worked for seven years and seven months in Elkadek company, when calculating her gratuity, 8 years would be taken into consideration. If she has spent 7 years and 3 months in the company, only 7 years will be put into consideration when calculating her gratuity.


This being said, we should now have an idea of the amount we would collect after retirement as gratuity with this article. Also, when putting down our next of kin, we should endeavor to always use our children so that in case anything happens,the money would not fall into the wrong hands and be misused.

We should not just depend on this money, rather, we should work hard and set up a business you we can finance with that gratuity when you retire. We should so side businesses that would make us worry less after retirement even if our gratuity is being delayed.

Also Read

Pension in Nigeria: All You Need To Know

5 best businesses to do in Nigeria after retirement: business after retirement guide

How To Get Loans In Nigeria Without A Salary Account/Collateral

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