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.
- Gratuity payment
Updated 2026-07-25 · one of 47 terms in the OnJob career glossary
Key takeaways
- Gratuity is a lump-sum benefit an employer pays you for long service, typically after you complete five years of continuous employment.
- Also called Gratuity payment.
- The amount is calculated using a formula based on your last drawn basic pay and the number of years served.
- Because gratuity is part of your CTC but only paid out after the qualifying tenure, it is a deferred component.
What does Gratuity mean?
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.
How does Gratuity work?
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.
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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