Understanding Gratuity

Gratuity is a financial component offered by an employer to an employee in recognition of his/her service rendered to an organisation. It is a part of the salary an employee receives and can be viewed as a benefit plan designed to aid an individual in his/her retirement.

Eligibility

Only after completion of service of five years, an employee can receive the gratuity amount. For calculation purposes, if an employee completes more than 240 days in the 4th year, he is eligible for Gratuity.

Initially only permanent employees were officially eligible for Gratuity payment, however the Union government modified the Industrial Employment (Standing Orders) Central (Amendment) Rules. The rules now say all such workers would be “eligible for all statutory benefits available to a permanent workman proportionately according to the period of service rendered by him, even if his period of employment does not extend to the qualifying period of employment required in the statute”

Calculation

Gratuity Payment- 4.9% of (Basic+DA)

This amount is due for payment to the personnel on resignation or termination of employment.

In case an employee has been terminated due to fraudulent activities or breach of the employee agreement, in such cases, he/she is not eligible for gratuity payment after termination

You can read further about the act from here

Forms

The Various forms that need to be filled for Gratuity claim along with their usage