As per the Payment of Gratuity Act 1972, an employer is obliged to pay gratuity to an employee after he/she has rendered a continuous service of atleast 5 years. Gratuity is payable to an employee on:
- Normal retirement
- Resignation/early retirement Death or
- Disablement due to accident or disease (completion of 5 years of service is not necessary in such cases)
Employer/Trustee of the Gratuity Scheme shall fund for gratuity liability by: Remitting the recommended contribution for the past service and an annual contribution for the future service as per the actuarial valuation provided by company. Transferring existing assets if any to company Gratuity Scheme based on mutually agreed asset valuation. This fund is then invested with the insurance company under their gratuity policy so as to increase the monetary value of the fund so that the employee can get more than what he invests.
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