Gratuity is a statutory benefit governed by Payments of Gratuity Act, 1972. Under
the Act, it is employer’s statutory liability to pay 15 days salary (15/26 of a
month's wages, taking the last drawn salary as the basis) for every completed years
service to each of his employees on their exit, for any reason after five years
of continuous service, subject to maximum limit of 10 lacs. The employee is eligible
for 15 days of pay for each completed year of service, either on:
- Retirement
- Permanent Total Disablement during service
- Death during service
- Resignation from service
The employer can also structure a gratuity benefit that is higher than stipulated
in the statutory requirements.
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