Gratuity
Topic: Employment, Unemployment and Informalisation · NCERT: Class 10, Ch 2 "Sectors of the Indian Economy"
Meaning
Gratuity is a lump-sum payment an employer makes to an employee on retirement, resignation or death. It is a reward for long service and is part of social security in the organised sector. The employee normally needs five years of continuous service. Under the Code on Social Security, fixed-term employees qualify after one year. It is paid at 15 days' wages for each completed year of service.
Example
A bank clerk earning ₹30,000 a month retires after 20 years. Fifteen days' wages is about ₹15,000, so the clerk gets about ₹15,000 × 20 = ₹3 lakh as gratuity. (This is a simple calculation that treats 15 days as half a month.)
Don't confuse with
- Pension: this is a regular payment after retirement. Gratuity is paid once.
- Provident fund: this is retirement savings built from both employer and employee contributions. Gratuity is paid by the employer alone.
Related concepts
- Organised sector
- Unorganised sector
- Job security
- Overtime
- Paid leave
- Provident fund
- Pension
- Social security
- Trade unions
- Collective bargaining