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The Payment of Gratuity Act is a labor law in several countries, including India, that focuses on providing financial security to employees after completing a certain period of continuous service with an employer. In India, the Payment of Gratuity Act of 1972 governs the payment of gratuity to employees.
Under this law, gratuity is a lump-sum payment made by the employer to an employee as a gesture of gratitude for the employee's long and meritorious service. To be eligible, an employee must have completed at least five years of continuous service, although certain exceptions exist, such as death or disablement due to an accident or illness.
The gratuity amount is calculated based on a formula that considers the employee's last drawn salary and the number of years of service. Employees must submit a formal application to their employer for gratuity within the prescribed time frame.
The Payment of Gratuity Act aims to provide financial stability to employees upon retirement or resignation and to acknowledge their dedication to the organization. Understanding the provisions of this law is essential for both employers and employees to ensure fair and timely gratuity payments.