Gratuity
A statutory lump sum paid to employees upon completing five years of service.
Definition
Gratuity is a statutory retirement benefit payable under the Payment of Gratuity Act, 1972 in India to employees who have completed at least five years of continuous service with an organization. The amount is calculated as 15 days of last drawn salary for each completed year of service. It is a recognition of the employee's loyalty and long-term contribution to the organization.
Example
“After completing 10 years with the company, Ramesh received a gratuity of ₹2.5 lakhs calculated on his last drawn basic salary of ₹50,000.”
Usage Examples
- 1
“The team applied gratuity best practices to improve their compensation outcomes significantly.”
- 2
“Understanding gratuity is essential for anyone building a career in HR & People.”
When & How to Use
Use 'Gratuity' when working in Compensation contexts where gratuity is a statutory retirement benefit payable under the payment of gratuity act, 1972 in india to employees who have completed at least five years of continuous service with an organization.
- ▸Applying gratuity principles during a compensation project or initiative
- ▸Explaining gratuity to a junior team member or stakeholder unfamiliar with HR & People
- ▸Evaluating options or proposals using gratuity as a decision-making criterion
Etymology & Origin
The term 'Gratuity' derives from professional usage and entered HR & People professional usage as the field formalised in the 20th century.
History & Evolution
The concept of gratuity has evolved alongside HR & People. Early practitioners relied on informal methods; structured approaches emerged with the professionalisation of compensation in the mid-20th century. Today, gratuity is a standard part of HR & People practice globally.
Synonyms
- service gratuity
- long service award
- terminal benefit