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 In some special cases like death and physical disability because of a disease or accident, gratuity can be withdrawn before 5 years.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.