Gratuity Guide
Eligibility, computation logic, nomination, payment timelines and the forfeiture grounds for statutory gratuity.
Overview
Gratuity is a service-linked terminal benefit: once an employee completes the qualifying period of continuous service with the establishment, an amount computed on last-drawn wages and completed years becomes payable on exit, superannuation, death or disablement. The two variables that decide most disputes are what counts as continuous service and what counts as wages.
Administratively, the employer's duties start early. Nominations should be collected at the outset and updated on life events, the establishment's liability should be recognised rather than discovered at exit, and on cessation the employer is expected to determine the amount and pay it within the prescribed period without waiting for the employee to apply. Delay attracts interest exposure.
The wage definition under the Code on Wages has changed how the base for terminal benefits is read for many pay structures, and the statutory ceiling is revised by notification from time to time. Use our calculator for the arithmetic and check the current ceiling and wage definition rather than relying on a figure carried over from an older payroll note.
General information only, not legal advice. Thresholds, rates, prescribed forms and due dates change by notification and differ by state — verify against the current gazette, circular or state labour department publication before acting.
Common questions
The questions practitioners raise most often on this topic.
Who is eligible for gratuity?
Employees who complete the statutory qualifying period of continuous service, with the qualifying period relaxed in cases of death or disablement.
What wages go into the computation?
Last-drawn wages as defined in the applicable statute. Because the Code on Wages restated the definition of wages, structures heavy on allowances need to be re-tested.
Labour Codes 2026How is the amount calculated?
On completed years of service against last-drawn wages, subject to the statutory ceiling. Our gratuity calculator applies the current formula.
Gratuity calculatorCan gratuity be forfeited?
Only on the specific statutory grounds, and only to the extent permitted — forfeiture requires a properly recorded basis, not an assertion at exit.
By when must gratuity be paid?
Within the prescribed period from when it becomes payable; interest runs on delayed payment. Verify the current timeline before setting an internal process.
Where to go next
Ask about gratuity
Answers are grounded in Complyuva's live regulatory update feed and the state Labour Code tracker, and scoped to Gratuity Guide. Informational only — not legal advice.
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Reference content only. Rates, limits, prescribed forms and state rules change by notification — confirm against the latest gazette, circular or state labour department publication before acting.
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