There is no contribution to gratuity. It is an amount payable by the employer (employer alone without taking any amount from the employee as deduction from his salary) when an employee leaves after serving him for a long period. Therefore, it is a reward for long service. In order to avoid confusions regarding what constitutes long service and what should be the amount payable for the long service it was decided to have a legislation and Kerala state enacted the Kerala Industrial Employees Payment of Gratuity Act, in 1970. Later on a central Act was passed in 1972, viz, the Payment of Gratuity Act, 1972.
As per the above Act the service for entitlement of gratuity is fixed as five years and as such any employee who is leaving the establishment to which the Act applies, after completing at least five years of service will be getting gratuity at the rate of 15 days salary at the time of leaving for every completed year of service. Any fraction of a year of service above six months shall be taken as a year. Therefore, if an employee is leaving after completing, say seven years, six months and one day, then he will be getting gratuity for eight years. It is to be paid by the employer alone and no amount should be taken from the employee towards it.
5th December 2010 From India, Kannur