Gratuity is a compulsory benefit to be provided to employees as per the Gratuity Act, 1972. It is a lump sum amount paid out to employees, once they are no longer a part of the company. An employee is eligible for payment of gratuity only if they fulfil the conditions specified under the Gratuity Act.

As an employer, one can choose to invest a certain amount of money in order to meet their future gratuity liability. The amount set aside by them is invested in a range of equity and debt funds to provide returns over a long term. The fund created under this plan is then used to make claim payments for gratuity when employees depart.