Gratuity Policy Template

Gratuity Policy

Purpose of Gratuity Policy

This Gratuity Policy sets out the principles and procedures by which [Company Name] provides a gratuity payment to eligible employees. The policy explains eligibility, calculation, payment timing, approval responsibilities, record keeping and exceptions, to ensure consistent and transparent practice across the organization.

Scope and Eligibility

This policy applies to all employees of [Company Name] unless otherwise excluded by contract or specific company scheme. Eligibility criteria include a minimum continuous period of service as defined by the employment terms or relevant company practice. Temporary, contract, and fixed-term arrangements will be considered according to the specific terms of employment and the applicable company practice.

Entitlement and Calculation

Gratuity entitlement is based on length of continuous service and the employee's relevant remuneration at the time of cessation of employment. The method of calculation will be described in the employee contractual terms or internal calculation schedule. The policy may reference one of the following approaches, as applicable to [Company Name]:

• Service-based formula that multiplies salary and years of service.
• Pro rata calculation for partial years of service.
• Defined maximum ceilings or minimum guarantees where applicable.

All calculations must be documented and retained in the employee file. Payroll and HR will maintain calculation templates to ensure consistency.

Payment Timing and Method

Gratuity payments will be processed following termination of employment, subject to completion of final payroll procedures and any required approvals. Payments will normally be made through the regular payroll or by bank transfer in the next appropriate pay cycle. Where tax or statutory deductions apply, these will be handled in accordance with standard payroll practice.

Payment on Termination or Death

On resignation, retirement, redundancy, or termination for reasons other than gross misconduct, gratuity will be paid in accordance with this policy and the employee's service record. In the event of an employee’s death, gratuity may be paid to the nominated beneficiary or estate, subject to verification of documentation and any applicable company procedures.

Forfeiture and Exceptions

Gratuity entitlement may be reduced or forfeited in cases specified in employment contracts or company rules. Examples include termination for gross misconduct or breach of key contractual obligations. Any exceptions to standard entitlements must be approved through the formal approval process set out below and documented in the employee record.

Documentation and Record Keeping

HR and Payroll are responsible for maintaining accurate records of service history, salary elements used in calculations, approvals, and payment confirmations. Documentation will be retained in accordance with company record retention policies.

Approval Process

All gratuity payments, exceptions, and adjustments require formal approval before payment. The approval process includes verification of eligibility, review of calculation, and sign-off by designated approvers. Typical approvers include HR, Payroll, and an authorized [Designated Approver] such as a senior manager or member of the finance team. Any deviation from standard calculations must be authorized in writing and filed with the payment documentation.

Role of Managers and HR

Managers are responsible for notifying HR promptly of an employee’s termination or retirement and providing necessary documentation. HR is responsible for determining eligibility, preparing the calculation, coordinating with Payroll, obtaining required approvals, and communicating the outcome to the employee or beneficiaries.

Non-Compliance

Failure to follow this policy may result in delayed payments, reversal of unauthorized payments, recovery of overpayments, and disciplinary action where appropriate. Managers and staff who fail to obtain required approvals or who provide false information may be subject to corrective measures in line with company disciplinary procedures.

Note

[Company Name] may update this policy from time to time to reflect business needs and best practice. Employees should refer to the latest version maintained by the HR Department. For clarification on how this Gratuity Policy applies to individual circumstances, employees should contact HR.