Gratuity

What is Gratuity?

Gratuity is a sum of money paid by an employer to an employee for services rendered, typically payable after continuous service of five years or more.

Explanation

Gratuity is a form of gratitude provided by the employer and is calculated based on the employee’s tenure and last drawn salary.

Practical Example of Gratuity

After working for 10 years at a manufacturing firm in Mumbai, an employee receives a gratuity payment upon his retirement, calculated based on his years of service and final salary.