Who Gets Gratuity and When
Gratuity is a lump-sum amount paid by an employer to an employee for long-term service. It is governed by the Payment of Gratuity Act, 1972. To be eligible, you typically need 5 years of continuous service with the same employer. Exceptions: death or permanent disablement—no 5-year rule. This guide explains gratuity eligibility: who is covered, what counts as service, exceptions, contract employees, and how to claim. Use our Gratuity Calculator to estimate your amount.
Key Takeaways
- 5 years minimum: Same employer. Resignation, retirement, superannuation
- Death/disablement: No 5-year rule. Paid to nominee or employee
- Continuous service: Includes authorised leave, maternity, sick leave. Breaks may break continuity
- Covered establishments: 10+ employees (factories, mines, shops, etc.)
- Contract employees: Eligible if employer-employee relationship and Act applies
Minimum Service: 5 Years
You must complete at least 5 years of continuous service with the same employer. Five years means you have worked for 4 years and 240 days (roughly 4 years 8 months)—a part of a year exceeding 6 months counts as a full year. If you resign or retire before 5 years, you are not eligible for gratuity under the Act. Some employers pay ex-gratia gratuity even before 5 years—check your offer letter.
Exceptions: Death and Disablement
- Death: Gratuity is payable to the nominee regardless of service. No 5-year requirement.
- Permanent disablement: If you are permanently disabled (accident or illness) and unable to work, gratuity is payable even before 5 years.
- Nomination: Ensure you have filled Form F to nominate a family member. Helps in speedy settlement on death.
What Counts as Continuous Service
- Uninterrupted employment: Working days, weekends, holidays.
- Authorised leave: Casual leave, earned leave, maternity leave (as per law).
- Sickness leave: Medical leave with valid proof.
- Layoff: If employer lays off temporarily, service may count. Check with employer.
- Breaks: Unauthorised long breaks may break continuity. Resignation and re-joining: new period starts.
Who Is Covered Under the Act?
Establishments with 10 or more employees: factories, mines, oilfields, plantations, ports, railways, shops, and other notified establishments. Central and state government employees are covered under separate rules. If your employer has fewer than 10 employees, the Act may not apply—but some employers still pay gratuity as per policy.
Contract and Part-Time Employees
Contract employees may be eligible if there is an employer-employee relationship (direct hire, not through contractor in some cases). Part-time employees are eligible if they work 240 days in a year. The rules can be complex; check with your HR or employer. Daily wage workers in certain sectors may also be covered.
When Is Gratuity Payable?
- Resignation: After 5+ years. You resign, serve notice, leave. Gratuity within 30 days.
- Retirement: On reaching superannuation age (e.g. 58 or 60).
- Superannuation: When you complete retirement age as per company policy.
- Death: To nominee. No 5-year rule.
- Termination: If employer terminates (except misconduct), gratuity may apply. Check labour laws.
Use Our Gratuity Calculator
Enter last drawn basic+DA and years of service. Get gratuity amount. Plan for resignation or retirement.
Disclaimer
Rules vary by establishment and employment type. Verify with employer/HR. This is general guidance.