Retirement Benefits: PF, Pension, Gratuity and Superannuation

When you retire or leave from the company you were working in, you will see papers related to retirement benefits. You hear terms related to retirement benefits like PF, Pension, Gratuity and Superannuation etc. This post is an attempt to help our readers with the difference between the terms.


This is a benefit from the employee side, if the period of service of the employee is greater than 5 years. It is amount that will be paid for employee’s continuous service of 5 years in a single company for a minimum of 240 days every year. This will be mainly calculated on employee’s basic salary (last month salary). Gratuity is not calculated on any fixed rates, but as by the below formula.

As per the Act, the gratuity amount is 15 days’ wages multiplied by the number of years of employee. Here wage means  basic salary plus dearness allowance. Take the monthly salary drawn by the employee last (basic plus dearness allowance) on resignation or retirement and divide it by 26, assuming there are four Sundays in a month. This is the employee’s daily salary. Multiply this amount by 15 days and further with the number of years the employee have put into service.

The percentage of basic salary which you may get as a Gratuity may be roughly around 6-7%. There is no contribution from the employee.


Superannuation is a retirement Benefit by employer. It is a contribution made by employer each year on employee’s behalf towards the group superannuation policy held by the employer. The Company may pay upto 15% of basic wages as superannuation contribution. There is no contribution from the employee.

Provident Fund

Check these links to understand provident fund and tax rules.


Check the pension calculator.