What is Gratuity?

LiveRec EditorialUpdated

Gratuity is a lump sum an Indian employer pays an employee for long service, under the Payment of Gratuity Act, 1972. It generally requires five years of continuous service; under the Code on Social Security 2020, in force since 21 November 2025, fixed-term employees qualify after one year (PIB, checked 2026-10-30).

How gratuity differs from other pay

Gratuity is not paid monthly. It is a one-time payment made when you leave after the qualifying period, so it counts in CTC but does not reach your account each month. It is separate from PF and from your notice period pay.

What to check in your offer

  • Whether gratuity is shown in the CTC breakup, and how much.
  • Your employment type. Fixed-term and permanent employees may have different eligibility periods, as noted above.
  • Whether the offer states anything about service you may carry over. Ask HR rather than assume.

What to do when you leave

  1. Ask HR how long you have served and whether you meet the period.
  2. Ask for the gratuity calculation in writing as part of your full and final settlement.
  3. If you think the amount is wrong, raise it with HR first, then the labour authorities if it is not resolved.

Common mistakes

  • Leaving a few weeks before the qualifying period without checking.
  • Assuming gratuity is paid on top of CTC. It is usually inside it.
  • Not asking for the working in writing.

Example

It is part of CTC but is paid on leaving after the qualifying period.

Sources

This is general information, not legal, tax or immigration advice. Rules change and your situation may differ. Consult a licensed attorney or qualified adviser.