Template Description

The Payment of Gratuity Policy Template is a legally formatted, statutory HR policy document developed following the Payment of Gratuity Act, 1972, designed to ensure proper financial closure and long-term service rewards for employees of any organization. Structured as a 5-page Microsoft Word document, the policy sets out the framework for eligibility, calculation, payment procedures, nomination, taxation, forfeiture, and dispute redressal related to gratuity. It is ideal for companies operating across India who wish to establish a standardized gratuity protocol for both operational and legal compliance. This policy ensures employees are fairly compensated for their loyalty and service while safeguarding the company from non-compliance risks.

Understanding the Payment of Gratuity Policy Template

Key Features of the Template

1.     Legal Foundation Referenced: The template is built entirely in line with the Payment of Gratuity Act, 1972, along with relevant rules, amendments, and judicial precedents, ensuring it meets central statutory obligations.

2.     Eligibility Definition: Provides clarity on the 5-year continuous service requirement and includes all qualifying separation scenarios such as resignation, superannuation, retrenchment, death, or disablement. It also covers exceptions for mandatory gratuity in case of death or permanent disability.

3.     Calculation Method: Includes the industry-standard formula: Gratuity = (Last Drawn Basic + DA) × 15 ÷ 26 × Number of Years of Service, along with key notes such as rounding of service years and government-set ceilings

4.     Payment & Timelines: Establishes a clear framework for initiating and completing gratuity payments within 30 days of separation, and outlines interest implications for delayed payments.

5.     Nomination & Legal Compliance: Details the requirement of Form F for nomination and the process to update it upon changes in marital or family status. Emphasises recordkeeping and legal obligations regarding nomination, especially in case of death.

6.     Taxation Guidelines: Outlines current Income Tax exemptions up to ₹20,00,000 as per Section 10(10) of the IT Act, guiding finance and HR on tax computation and documentation.

7.     Forfeiture Clause: Includes provisions from Section 4(6) of the Gratuity Act, allowing partial/full forfeiture in cases involving fraud, misconduct, or moral turpitude—safeguarding the company’s rights.

8.     Recordkeeping & Retention: Lists essential documentation such as the Gratuity Register, Payment Receipts, and Nomination Forms with respective owners and retention timelines (minimum 8 years).

9.     Dispute Resolution Mechanism: Provides a grievance redressal route through HR or escalation to the Controlling Authority (Labour Commissioner), ensuring employees have legal recourse in case of disputes.

Conclusion

The Payment of Gratuity Policy Template provides a robust, transparent, and legally compliant structure to manage employee gratuity entitlements and liabilities. By detailing eligibility, process timelines, legal compliance, and grievance mechanisms, the template empowers HR departments to execute seamless settlements and protect employee welfare while mitigating statutory risk for the company. It is an essential tool for ensuring financial closure, legal compliance, and maintaining employer reputation in matters of long-service benefit administration.