Friends, when a person who has worked for a company for many years is fired, retires, or leaves the company, they receive certain financial benefits. One such benefit is gratuity. While a pension provides monthly income after retirement, gratuity is a lump sum payment made by the employer in gratitude for the employee's dedicated service. Let's learn more about it.

The Payment of Gratuity Act, 1972, was enacted in India to ensure the financial security of employees who have served in an organization for a significant period. Let's learn more about it.

Key Points About Gratuity

Meaning of Gratuity

Gratuity is a lump sum payment made by the employer to the employee at the end of their service.

It is different from a pension and is not automatically available to everyone.

Eligibility Criteria

The employee must have completed at least five years of continuous service in the organization.

Gratuity applies to employees in both the government and private sectors.

The Gratuity Act applies to all establishments such as factories, mines, oil fields, ports, railways, and any company with 10 or more employees.

Exceptions in Service Period

According to Section 2A of the Gratuity Act:

Employees working in underground mines can receive gratuity after 4 years and 190 days of service.

In other organizations, gratuity can be received after 4 years and 240 days (approximately 4 years and 8 months).

When is Gratuity Paid?

Generally, gratuity is paid upon retirement, resignation, or termination of service after the required service period.

It cannot be availed during current employment.