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| Home > Employment, Criminal and Labour > Eligibilty for claiming gratuity in India |
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| What Is Gratuity |
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Gratuity is a statutory benefit paid to the employees who have rendered continuous service for at least five years. It is a lump sum amount paid to an employee based on the duration of his total service. The benefit gratuity is payable to an employee on cessation of employment (either by resignation, death, retirement or termination, etc) by taking the last drawn salary as the basis for the calculation. Gratuity is an important form of social security and is in the form of a gratitude provided by the employer to the employees in monetary terms for the services rendered by them to the organization. It is a defined benefit plan and is one of the many retirement benefits offered by the employer to the employee upon leaving his job. Gratuity payment liability of the employer tends to increase with an increase in the salary and tenure of employment.
Payment of Gratuity Act, 1972 provides for a scheme for the payment of gratuity to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments. The Payment of Gratuity Act is administered by the Central Government in establishments under its control, establishments having branches in more than one State, major ports, mines, oil fields and the railways and by the State governments and Union Territory administrations in all other cases.
The employer may pay the gratuity proceeds from his current revenue. They may set up a gratuity fund as a part of their financial planning. Many insurance companies have designed special schemes which relate to gratuity.
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