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Governed by the Payment of Gratuity Act, 1972 and an important part of payroll, Gratuity is a retirement benefit that an employee is given by the employer as a token of appreciation and gratitude for the services he has rendered for 5 or more years at the time of superannuation, resignation, or retirement. In some special cases like death and physical disability because of a disease or accident, gratuity can be withdrawn before 5 years. Enforced in 1972, The payment of Gratuity Act comprises of 15 sections and has been amended in 1984 and 1987. It is a part of Industrial law that was established to provide social security to the workmen.


An employee is considered to have completed 5 years when-

  • He has completed 240 working days in 12 calendar months right before the date of calculation, or;
  • 190 days if the establishment works for 5 days in a week.

Note: This act is not applicable to individuals working under Central or State Government as their gratuity payment may be governed by some other act. 

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Saajan Sharma

Saajan Sharma is a digital marketer and blogger with several years of experience in the industry. He likes to help businesses stay informed and up to date with established and emerging technologies like HRMS, IoT, AI, Cloud, and others

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