Payroll & benefits
Gratuity & Group Gratuity
Gratuity is a promise to every long-serving employee, and the new definition of wages has raised the bill for some employers. We compute what is due, help you fund it through a group gratuity policy with LIC, and follow up claims until they are paid.
Scope of work
What we do
- Group gratuity policyWe help you set up a group gratuity policy with LIC, so the liability is funded year by year instead of falling on you all at once.
- Gratuity computationWe work out the gratuity due to employees who resign, retire or are terminated, and to nominees when an employee dies.
- Fixed-term employeesWe compute gratuity for fixed-term employees, who now qualify after one year of service.
- The new wage definitionWe recompute your liability on the Code's definition of wages, which applies to gratuity from 21 November 2025.
- Actuarial statementsWe arrange the actuarial valuation your auditors need for the gratuity provision in your books (AS 15, or Ind AS 19 where it applies).
- Claim follow-up with LICWe follow up with LIC so claims are settled quickly and employees or nominees are paid.
- Gratuity in CTCWe help HR account for gratuity when building CTC and offer letters.
- Inspections and noticesWe attend labour inspections and assessments with you and draft replies under the Code.
- Closures, mergers and union mattersThe gratuity side of closures, mergers, amalgamations and union settlements, worked out in advance.
- UpdatesChanges in rules and limits explained as they are notified.
Is this for you?
Who needs this
- Employers whose gratuity liability rose with the new wage definition
- Companies that carry gratuity unfunded on their books
- Businesses employing fixed-term staff
- HR teams settling gratuity for a leaving or deceased employee
Deadlines we keep
- Gratuity paymentWithin 30 days of it becoming payable
- Group gratuity policyEach year on your policy's renewal date
What you receive
- Gratuity computation for each leaving employee
- Actuarial valuation statement for your annual accounts
- Group gratuity policy set up and renewed with LIC
- Claim follow-up until the amount is paid
Under the Labour Codes
Read the law
The chapters behind this service, in the official text with plain-English notes beside it.
Questions
Common questions about Gratuity
Who is eligible for gratuity?
Employees who leave after at least five years of continuous service, whether by retirement, resignation or termination. The five-year condition does not apply on death or disablement, and fixed-term employees now qualify after one year.
Why has our gratuity liability gone up?
Gratuity is worked out on wages last drawn, and since 21 November 2025 wages follow the Labour Codes definition. If excluded allowances were more than half of pay, the excess now counts as wages, and the higher base applies to the employee's whole service. A fresh actuarial valuation will show the new figure, and we can arrange one.
Why take a group gratuity policy?
It builds the fund steadily, keeps it outside your working capital and makes payouts simpler. Whether it suits you depends on your headcount and cash flow. We help you decide and set it up with LIC.
How quickly must gratuity be paid?
Within 30 days of it becoming payable. If it is late, the employer owes simple interest on top. We work out the amount promptly and, where you have an LIC policy, follow up the claim.
Does the Payment of Gratuity Act still apply?
No. The Payment of Gratuity Act, 1972 has been folded into the Code on Social Security, 2020, and gratuity now sits in Chapter V of the Code. For an employee who leaves on or after 21 November 2025, gratuity is worked out under the Code on wages last drawn, for the whole period of service.
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