Gratuity – Check Gratuity Calculation What is Meant by Gratuity? Gratuity is a monetary benefit given by the employer to his employee at the time of retirement. It can be defined as a benefit plan where the employee does not have to contribute anything from his salary. An employee is eligible to receive this benefit only if he has completed 5 years of continuous service under the same employer. Gratuity refers to the sum of money paid by the employer for the services provided by the employee in the company. Gratuity is administered by the Payment of Gratuity Act, 1972. How Does Gratuity Payment Work? An employee is eligible to receive gratuity only if he has completed 5 years of continuous service under the same employer. An employer may opt to provide gratuity individually to each employee or may take a group gratuity plan with an insurance provider. The employer provides annual contributions to the insurer for a group plan. The employee can also actively contribute to his gratuity amount.
There is no prescribed percentage stated by law for the amount of gratuity an employee is eligible to receive. Gratuity payment depends upon two main factors: last drawn salary and