What is gratuity definition?

Gratuity is a monetary benefit given by an employer to an employee for the services offered by them during their employment period. It is usually paid in the form of a lump sum amount at the time of employee retirement or resignation. Gratuity is a statutory benefit and is governed by the Payment of Gratuity Act, 1972, which applies to all establishments employing ten or more workers. The amount of gratuity is calculated on the basis of the employee's last drawn salary and the number of years of service. The formula for calculation is (salary x years of service x 15)/26. The maximum amount of gratuity payable under the Act is Rs. 20 lakhs. Gratuity is a form of social security and is meant to provide financial security to employees after they have completed their service.