Gratuity

Meaning: 

How to understand Gratuity:

Gratuity provides essential financial security to employees during retirement or job transitions, acting as a significant component of their long-term financial planning.

It fosters trust and stability in employer-employee relationships by ensuring employees have a financial cushion.

Importance of Gratuity:

Gratuity acts as a retirement fund, helping to reduce future financial stress and is included in long-term financial planning and wealth building.

It offers tax benefits, as gratuity payments are tax-free up to a limit for private employees and fully tax-free for government employees.

Types of Gratuity:

Statutory Gratuity:

Given under the Payment of Gratuity Act, 1972, and mandatory for establishments with 10 or more employees.

Non-Statutory (Company Gratuity): 

Offered by some companies even if not legally required.

Death Gratuity:

Paid to the family in case of the employee’s death, with no 5-year rule applied.

Disability Gratuity:

Paid if the employee is disabled, even if the service is less than 5 years.

How Gratuity Are Evolving:

Digital systems are enabling faster claim processing for gratuity payments.

Companies are integrating gratuity with employee benefit platforms for better management.

Increased employee awareness is being driven by HR digitalization and technology.

Many firms are offering enhanced gratuity benefits to retain talent in a competitive job market.

The government may revise tax-free limits to align with rising salaries and inflation.

More clarity and transparency are being introduced through online calculators and portals for gratuity calculations.

Overall, gratuity is becoming more structured, transparent, and employee-friendly.