What is Gratuity?
Gratuity is a lump-sum benefit an employer pays you for long service, typically after you complete five years of continuous employment.
Key takeaways
- Gratuity is a lump-sum benefit an employer pays you for long service, typically after you complete five years of continuous employment.
- Gratuity matters when you read a salary slip, compare job offers, or plan your career.
- Knowing how Gratuity works helps you make sharper, better-informed job decisions.
Gratuity — meaning & explanation
Gratuity is a statutory benefit paid to employees as a reward for long-term service. In India it is governed by the Payment of Gratuity Act and is generally payable when you leave a company after completing a qualifying period of continuous service.
The amount is calculated using a formula based on your last drawn basic pay and the number of years served. It is usually paid on resignation, retirement, or in certain other cases of separation.
Because gratuity is part of your CTC but only paid out after the qualifying tenure, it is a deferred component. Knowing this helps you read an offer accurately rather than treating the full CTC as immediately available cash.
Related glossary terms
Basic Pay
Basic pay is the fixed core component of your salary, before allowances, on which many benefits like PF, gratu…
PF / EPF (Provident Fund)
PF/EPF (Employees' Provident Fund) is a retirement savings scheme where you and your employer each contribute…
CTC (Cost to Company)
CTC (Cost to Company) is the total annual amount an employer spends on you — salary plus all benefits and cont…
Notice Period
A notice period is the time between resigning and your last working day, during which you continue working so…
Relieving Letter
A relieving letter is a document your former employer issues confirming you have completed your notice period…
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More glossary terms
Gratuity — FAQs
What does Gratuity mean?
Gratuity is a lump-sum benefit an employer pays you for long service, typically after you complete five years of continuous employment.
Why does Gratuity matter to a jobseeker?
Because gratuity is part of your CTC but only paid out after the qualifying tenure, it is a deferred component. Knowing this helps you read an offer accurately rather than treating the full CTC as immediately available cash.
Is Gratuity the same as Gratuity payment?
Yes — Gratuity is also commonly called Gratuity payment. Gratuity is a lump-sum benefit an employer pays you for long service, typically after you complete five years of continuous employment.
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