The Payment of Gratuity Act, 1972 provides for a scheme for the payment of gratuity to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments. Payment of Gratuity Act, 1972 is administered by the central government in establishments under its control, establishments having branches in more than one state, major ports, mines, oil fields and the railways and by the state governments and union territory administrations in all other cases.

The State of Delhi has made provisions regulating the payment of gratuity under Payment of Gratuity (Delhi) Rules, 1973. Payment of Gratuity Act, 1972 and the rules made thereunder for the State of Delhi make this benefit a statutory right for the employees.

In India, gratuity is a statutory benefit paid to the employees who have rendered continuous service for at least five years under Payment of Gratuity Act, 1972. The pre-requisite of completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement to the extent that the person is literally unable to provide the required services. In the case of death of the employee, gratuity payable to them shall be paid to their nominee or, if no nomination has been made, to their heirs.

An employee will be said to be in continuous service for a period if they have, for that period, been in uninterrupted service and includes service which may be interrupted on account of sickness, accident, leave, absence from duty without leave, lay off, strike or a lock-out or cessation of work not due to any fault of the employee, whether such uninterrupted or interrupted service was rendered.

The provisions of Payment of Gratuity Act, 1972 and rules applicable for gratuity provide for the procedure for payment of gratuity and recovery of any form of gratuity not given to an employee.