In continuation of the reply of Mr.Rao, it is to be emphasized that as gratuity is a one time terminal benefit payable in lump sum to an employee by the employer on his termination of employment other than dismissal, no contribution is required to be made by the employee. Therefore, the employer should not make any periodical deduction from the salary of the employee for this purpose. That's why it is made compulsory u/s 4-A (1) of the Payment of Gratuity Act,1972 that the employer should take up a Group Gratuity Insurance policy with the LIC of India on his own in respect of all his employees.