In short. To claim unpaid gratuity, send a written application to the employer with your service details. Gratuity must be paid within 30 days of becoming payable, with simple interest if late. If the employer refuses or delays, apply to the competent authority (formerly the Controlling Authority) of the labour department, which hears both sides and orders payment. An employer's appeal needs a deposit of the amount ordered.
Gratuity used to be governed by the Payment of Gratuity Act 1972. Since 21 November 2025 it is governed by Chapter V of the Code on Social Security, 2020, with the Central Rules notified on 8 May 2026 and state rules for most private employers. The basic scheme is the same: 15 days' wages for each year of service, payable on leaving after five years. The changes that matter are the new definition of wages and gratuity for fixed-term staff after one year, both explained in our post on what the four Labour Codes changed.
This post covers private sector employees and workers. Government servants get gratuity under their pension rules, discussed in our post on pension disputes for retired government employees. If salary for your last months is also unpaid, read our post on recovering unpaid salary alongside this one.
- The law
- Code on Social Security 2020, Chapter V
- Eligibility
- 5 years continuous service; 1 year for fixed-term
- Amount
- 15 days' wages per completed year
- Employer must pay
- Within 30 days of it becoming payable
- Late payment
- Simple interest at the notified rate
- Employer's appeal
- Within 60 days, after depositing the amount
Who is entitled to gratuity?
You are entitled to gratuity if you worked in a covered establishment and your employment ended after at least five years of continuous service. Covered establishments include factories, mines, plantations, ports, railways, and shops and establishments employing ten or more persons on any day in the preceding twelve months. Once an establishment is covered, it stays covered even if the headcount later falls below ten.
Gratuity becomes payable when employment ends by superannuation, retirement, resignation, death or disablement due to accident or disease, or on the expiry of a fixed-term contract. The five-year condition does not apply on death or disablement, and for fixed-term employees the Central Rules make gratuity payable after one year. There is no salary ceiling for eligibility: a senior manager is as entitled as a clerk.
Continuous service means uninterrupted service, including service broken by sickness, accident, authorised leave, a lawful strike, a lockout or a layoff not caused by the employee's fault. Where service has not been uninterrupted for a full year, an employee is treated as having been in continuous service for that year if they actually worked for at least 240 days in the preceding twelve months (190 days for work below ground in a mine). Short breaks between contracts that the employer creates artificially do not usually break continuity if the work was the same.
When gratuity is payable: common situations
The table below covers the situations people ask about most.
| Situation | Is gratuity payable? | What to watch |
|---|---|---|
| Resigned after 5 or more years | Yes | Count years from the date of joining to the last working day |
| Resigned after 4 years and some months | Usually no for permanent staff | Some High Courts have counted 4 years plus 240 days in the fifth year; the position is not uniform |
| Retired on superannuation | Yes | Wages at the time of retirement are the base |
| Died in service | Yes, regardless of years | Paid to the nominee, or to the legal heirs if there is no nomination |
| Disabled by accident or disease | Yes, regardless of years | Medical evidence of the disablement |
| Fixed-term contract ended after 1 year or more | Yes, pro rata | Applies under the Code on Social Security and the Central Rules |
| Dismissed for misconduct | Usually yes, unless forfeited on a lawful ground | The termination order must state the forfeiture ground |
| Company closed or sold | Yes | Transfer of business generally carries continuity of service |
Does four years and 240 days count as five years for gratuity?
This is the most argued question about gratuity. The rule is five years of continuous service. A few High Courts have read the provisions on continuous service to mean that an employee who completed four years and then worked 240 days in the fifth year has completed five years, and some employers accept this as a matter of policy. Other decisions have refused to stretch the rule. The position is not settled uniformly across India.
So treat it as an argument, not an entitlement. If you have four years and 240 days or more, it is worth claiming, citing the decisions that support you, but be ready for the employer to resist and for the authority in your state to take a cautious view. If you are about to resign at four years and ten months, waiting two more months removes the argument altogether.
Separately, for calculating the amount (not eligibility), a part year above six months is counted as a full year. Six years and seven months is counted as seven years. Six years and five months is counted as six.
How is gratuity calculated?
For an employee paid monthly, gratuity is 15 days' wages for every completed year of service, worked out as: last drawn monthly wages x 15 / 26 x number of completed years. The figure 26 reflects working days in a month after excluding Sundays, which is why 15 days' wages comes to slightly more than half a month's pay. For seasonal establishments the rate is 7 days' wages for each season, and for piece-rated workers the wages are averaged over the last three months.
"Wages" means basic pay plus dearness allowance and retaining allowance, as defined in the Code on Social Security. The 50% rule applies: if HRA, conveyance, special allowance and other excluded items together exceed half of total remuneration, the excess is counted as wages. For anyone whose salary structure kept basic pay low, this can raise gratuity substantially. Because gratuity is worked out on last drawn wages, the wider definition generally affects the whole calculation for anyone whose gratuity became payable on or after 21 November 2025, though employers have argued otherwise, so check the latest government clarification.
There is a ceiling on the total amount payable, set by the Central Government. When the Codes came into force the ceiling in force was ₹20 lakh; check whether it has been revised before you rely on the figure. An employer can always pay more under a contract or a scheme, and many do.
A made-up example: gratuity for nine years and seven months
Here's a made-up example. Sunita joined a Gurugram-headquartered company's Noida office in March 2017 and resigned with her last working day on 15 October 2026, which is nine years and about seven months of service. Her last salary slip shows a monthly gross of ₹90,000: basic ₹36,000, HRA ₹18,000 and special allowance ₹36,000.
First, the years. Nine years and seven months has a part year above six months, so it counts as 10 years for the calculation. Second, the wages. The excluded items add up to ₹54,000, which is 60% of gross. Half of gross is ₹45,000, so ₹9,000 is added back, and her wages for gratuity are ₹45,000, not ₹36,000.
Her gratuity is ₹45,000 x 15 / 26 x 10, which is about ₹2,59,615. The company's HR system, still using basic pay alone, has worked it out at about ₹2,07,692. The difference of roughly ₹52,000 is exactly the kind of dispute that goes to the competent authority, and Sunita should raise it in her written application, attaching her salary slips.
When must the employer pay, and what if it pays late?
The employer must work out the gratuity as soon as it becomes payable, give written notice of the amount to the employee and to the competent authority, and pay it within 30 days of the date it became payable. For a resignation that is usually the last working day. The employee should still apply in writing, because the application fixes the date from which delay is measured and removes any argument that the employer did not know the claim.
If the employer does not pay within 30 days, it must pay simple interest from the due date at the rate the government notifies, unless the delay was caused by the employee and the authority permits it. Interest is often a useful lever: a company that has delayed two years faces interest on top of the principal, and that changes the conversation.
Nomination matters if the employee dies. Every employee should file a nomination with the employer, ordinarily within ninety days of completing one year of service, and update it on marriage. Without a nomination, gratuity goes to the legal heirs, who may then need to prove heirship before the employer will pay.
How to claim unpaid gratuity, step by step
The forms are prescribed by the Central Rules or your state's rules, so ask for the current format; the sequence below stays the same.
Work out your figure
Calculate years of service from your appointment letter and relieving letter, and wages from your last salary slip, applying the 50% rule. Write the calculation on one page.
Apply to the employer in writing
Send a written application to HR and the employer's registered office, by email and speed post, giving your dates of joining and leaving, your wages, the amount claimed and your bank details. Keep the tracking record.
Wait for the employer's notice
The employer should tell you the amount it accepts and pay within 30 days of the gratuity falling due. If it pays less, accept the payment without giving up the balance and say so in writing.
Send a short legal notice if needed
A notice from an advocate that sets out the calculation, the interest running and the next step often produces payment, especially from employers who were simply slow.
File before the competent authority
Apply to the competent authority under the Code on Social Security for your area, usually an officer of the labour department. Attach your appointment letter, salary slips, relieving letter and correspondence.
Attend the hearing
The authority issues notice to the employer, hears both sides, examines documents and may take evidence. It then fixes the amount and directs payment with interest.
Enforce the order
If the employer neither pays nor appeals, ask the authority to issue a recovery certificate. The Collector recovers the amount as arrears of land revenue.
The old Act allowed a claim to be made even after the usual period if there was sufficient cause, and authorities generally take a practical view of delay. Still, apply promptly: evidence fades and companies change hands.
What happens before the competent authority?
The competent authority functions much like a small court. It sends notice to the employer, fixes a date and asks both sides to file documents. The employer usually disputes one of four things: the date of joining (often claiming an earlier period was with a different entity or through a contractor), continuity of service, the wages figure, or entitlement itself because of forfeiture. Your documents should answer each of these before it is raised.
The authority can summon witnesses, require documents and take evidence. Most cases are decided on papers within a few hearings, though a disputed date of joining can take longer. The order sets out the amount and interest and directs payment within a fixed time.
An employer who wants to appeal must do so within 60 days, and must first deposit the amount ordered, or a bank guarantee where the rules allow, with the authority. This deposit requirement is the employee's strongest protection, because it stops an appeal being used only to delay. If the employer neither pays nor appeals, the recovery certificate route follows. A final order can be challenged in the High Court under Article 226, but only on limited grounds.
Can the employer forfeit or withhold gratuity?
Gratuity can be forfeited only on the grounds the law allows. If an employee's services are terminated for an act or wilful omission or negligence that caused damage or loss to the employer's property, gratuity can be forfeited to the extent of the loss. It can be forfeited wholly or partly if services are terminated for riotous or disorderly conduct or violence, or for an act constituting an offence involving moral turpitude committed in the course of employment.
Forfeiture needs a termination on that ground, after a fair inquiry, and an order that says so. An employee who resigned cannot later have gratuity forfeited on an allegation that was never the basis of a termination. Forfeiture for loss is limited to the loss actually caused, which the employer must prove. A vague claim of "financial irregularities" does not do it.
Employers also try to withhold gratuity until a no-dues form is signed, to adjust a short notice period, or to set off a company loan. The law does not list these as forfeiture grounds, so a blanket withholding is open to challenge, though courts have allowed adjustment of some admitted dues in particular cases. Gratuity is also protected from attachment under a court decree, so creditors of the employee cannot seize it in the employer's hands.
Resigned without serving the full notice period: is gratuity lost?
No. Gratuity is a statutory entitlement earned by years of service, and short notice is not a ground for forfeiture. The employer may have a separate contractual claim for notice pay, and it may deduct that from salary dues if the contract allows, but it cannot refuse gratuity on that account. Questions about notice period clauses, bonds and their recovery are covered in our post on employment agreement clauses.
The same goes for joining a competitor, refusing to sign a release, or leaving on bad terms. None of these is a forfeiture ground. A point Advocate B.K. Singh often makes to employees in this position is that the employer's refusal letter is itself useful evidence, because it usually states the real reason, and the real reason is rarely one the law recognises.
Gratuity when the company has closed, been sold or become insolvent
Closure does not cancel gratuity. Employees whose services end because the establishment closes are entitled to gratuity on the usual terms, and the claim lies against the employer entity, including its directors or partners where the law makes them answerable as the employer. Where a business is transferred, the transferee usually takes over the employees with continuity of service, and gratuity is calculated on the whole period.
If the company is in insolvency, the position depends on whether a gratuity fund exists. Under section 36(4) of the Insolvency and Bankruptcy Code, sums due to workers and employees from the provident fund, pension fund and gratuity fund do not form part of the liquidation estate, so a properly maintained gratuity fund or insurance policy is protected. If the employer never funded gratuity, the claim becomes an employee dues claim in the insolvency process, filed with the resolution professional or liquidator by the deadline in the public announcement.
Employers covered by the Code are required to insure their gratuity liability or maintain an approved fund, where the government notifies this. Ask the employer, or the insurer named in your papers, whether a group gratuity policy exists. Our bankruptcy and insolvency advice page explains how employee claims fit into a CIRP or liquidation.
Fixed-term employees and the one-year rule
A fixed-term employee is someone engaged on a written contract for a fixed period. Under the Code on Social Security and the Central Rules, such an employee becomes eligible for gratuity after one year of service, calculated in proportion to the period served. This is a real change for people on one-year or two-year contracts in IT services, manufacturing and media, who under the old Act rarely reached five years with the same employer.
If your contract was for a fixed term and has ended after more than a year, claim gratuity for the period served. If your employer insists you were a consultant, not an employee, the label is not decisive. Authorities look at control, integration into the business, the pay structure and whether PF was deducted.
Where a series of fixed-term contracts runs back to back for the same work, count the whole period. Artificial breaks of a few days do not usually break continuity of service for gratuity.
Worked through a staffing agency or contractor: who pays gratuity?
If you were placed at a client's office or factory by a staffing agency or labour contractor, the agency or contractor is normally your employer for gratuity, because it hired you, paid you and deducted your PF. Your claim is against that entity, and the client is not usually liable merely because you worked on its premises. Look at your salary slips and EPFO passbook to see which entity was the employer of record.
The difficulty comes when the contractor changes but the worker stays. Many security guards, housekeeping staff and data entry operators in Delhi and Noida offices have worked at the same site for ten years under three or four successive agencies, each of which says the worker has only two or three years with it. Continuity across different employers is not automatic. Some agencies take over the workforce with continuity written into the agreement; others pay out gratuity when their contract ends. Ask each outgoing agency for its gratuity when it leaves, rather than waiting until the end.
Where the contract arrangement is a sham, with the client in reality controlling, supervising and paying the workers through a paper intermediary, the worker can argue that the client is the true employer. That argument needs evidence of who actually gave instructions, approved leave and fixed pay, and it is fought hard, so it is worth taking advice before filing on that basis.
Gratuity for government employees and private school teachers
Government servants are usually outside the gratuity chapter of the Code. Central Government employees get retirement and death gratuity under the CCS (Pension) Rules 2021, with a different formula and its own ceiling. Disputes go through the department and then the CAT, as explained on our service law and CAT practice page. Employees of public sector undertakings and autonomous bodies may be covered by the Code or by their own rules, depending on the body.
Teachers in private schools are covered. The Payment of Gratuity Act was amended in 2009 to include teachers in educational institutions, with retrospective effect, after earlier litigation had excluded them, and that coverage continues under the Code. A teacher who has served five years in a recognised private school can claim gratuity from the management in the same way as any other employee.
Documents for a gratuity claim
These are the papers authorities ask for. Most employees have them scattered across email and old phones.
Proof of service
- Offer letter and appointment letter
- Relieving letter or termination letter
- Experience certificate
- EPFO passbook showing the first contribution month
Proof of wages
- Last three salary slips
- Salary structure or CTC letter
- Bank statement showing salary credits
- Increment letters
The claim
- Your written application to the employer and proof of delivery
- Any reply, part payment or full and final statement
- Nomination form, if a nominee is claiming
- Death certificate and heirship papers, in a death claim
Mistakes that delay a gratuity claim
The most common mistake is calculating on basic pay alone. For exits after November 2025, the 50% rule applies, and an employee who accepts the employer's figure without checking can lose a substantial amount. The second is signing a full and final statement that records gratuity as "settled" when it has not been fully paid. If you sign, write "subject to my gratuity claim" next to your signature.
The third is not proving the date of joining. Companies restructure, and an employee who joined a group company in 2015 and was moved to a sister company in 2019 may be told that service started in 2019. Keep the transfer letter, and look at your EPFO passbook, which often shows a continuous member ID across the transfer.
The fourth is going to the wrong forum. The Code provides its own machinery, and courts have long treated the gratuity authorities as the proper place for these claims, so a civil suit or a consumer complaint is usually the wrong first step. PF disputes are separate again and go to the EPFO, as explained in our post on PF disputes and employer default.
If gratuity was refused after a dismissal
Where gratuity has been refused because you were dismissed, two questions run together: whether the dismissal itself was valid and whether the forfeiture was lawful. You can claim gratuity before the competent authority and, if you are a worker, also challenge the dismissal through conciliation and the Industrial Tribunal. Our post on remedies for wrongful termination covers the second route.
When Advocate B.K. Singh's office takes up a refused gratuity claim, the first document read is the termination order, not the gratuity letter, because forfeiture stands or falls on what that order says. If it does not name a forfeiture ground, or names one that the inquiry never found, the forfeiture is weak.
What to do this week
Find your appointment letter, relieving letter and last three salary slips. Work out your years and your wages using the 50% rule, and calculate the figure. If you have not yet applied in writing, send the application now by email and speed post. If more than 30 days have passed since the gratuity fell due, note that interest is running.
If you want an advocate to check your calculation and the employer's reasons before you file, the team of Advocate B.K. Singh at B.K. Singh & Associates can review the papers; send the details through our online legal enquiry form. Our labour and industrial laws page describes the wider employment work.
Frequently asked questions
What can I do if my employer is not paying my gratuity?
Apply to the employer in writing with your service details and calculation. If it is not paid within 30 days of falling due, file a claim before the competent authority under the Code on Social Security in the labour department. The authority can order payment with interest, and an unpaid order is recovered as arrears of land revenue.
How many years of service are required for gratuity?
Five years of continuous service for permanent employees. Fixed-term employees become eligible after one year under the Code on Social Security and the Central Rules. On death or disablement, gratuity is payable regardless of years served.
How do I calculate my gratuity?
Multiply your last drawn monthly wages by 15, divide by 26, and multiply by your completed years of service, counting any part year above six months as a full year. Wages mean basic pay plus DA, with the 50% rule adding back excess allowances. The total is subject to the notified ceiling.
Is gratuity payable on resignation?
Yes, if you have completed five years of continuous service, or one year for a fixed-term employee. The reason for leaving does not matter, and resigning without serving the full notice period does not forfeit gratuity.
Within how many days must gratuity be paid?
The employer must pay within 30 days of the date gratuity becomes payable, which is usually the last working day. If it pays late, it must add simple interest from the due date at the rate notified by the government.
Can an employer stop gratuity for not giving notice?
No. Short notice is not a ground for forfeiture. The employer may have a separate contractual claim for notice pay, but gratuity is a statutory entitlement and cannot be refused on that ground.
Can gratuity be forfeited for misconduct?
Only if services were terminated for misconduct on a ground the law recognises: damage or loss to the employer's property (to the extent of the loss), riotous or disorderly conduct or violence, or an offence involving moral turpitude in the course of employment. There must be a termination order stating the ground, after a fair inquiry.
Who is the competent authority for gratuity in Delhi?
The competent authority is an officer designated by the appropriate government, usually in the labour department for the district where the establishment is located. For establishments under the Central Government, such as banks and central PSUs, the central labour machinery handles claims. Check the current notification for your area.
Is there a time limit to claim gratuity?
Apply as soon as you leave. The old Act allowed late applications for sufficient cause, and authorities generally take a practical view, but delay makes evidence harder and can affect interest. Do not wait years on the assumption that the claim will keep.
Is gratuity payable if the company shuts down?
Yes. Closure is not a ground to deny gratuity, and employees whose services end on closure are entitled to it. If the company is in insolvency, a funded gratuity trust or policy is protected from the liquidation estate; otherwise the claim is filed with the resolution professional or liquidator.
Do private school teachers get gratuity?
Yes. Teachers in educational institutions were brought under the Payment of Gratuity Act by a 2009 amendment with retrospective effect, and that coverage continues under the Code on Social Security. A teacher with five years of continuous service can claim from the school management.
What is the maximum gratuity amount?
The Central Government notifies a ceiling. When the Labour Codes came into force the ceiling was ₹20 lakh; check whether it has since been revised. An employer may pay more under a contract or scheme, and the income tax treatment of the amount is a separate question.
Written and reviewed at B.K. Singh & Associates
Advocate B.K. Singh
Founder of B.K. Singh & Associates. MCA, LL.B., LL.M., with more than twenty years of practice before the Supreme Court, the Delhi High Court, district courts and tribunals across Delhi NCR. This article explains the general law as of 24 October 2026; it is not legal advice on your facts.