The Group Gratuity Scheme is an employer-sponsored benefit plan designed to manage and fund the gratuity liabilities payable to employees as per the Payment of Gratuity Act, 1972. Under this scheme, the employer creates a dedicated fund—often managed through a trust—and contributes to it regularly based on actuarial valuations. This fund is used to provide a lump-sum gratuity amount to employees upon retirement, resignation, death, or disablement, provided they have completed a minimum of five years of continuous service.

By participating in a Group Gratuity Scheme through an insurer like LIC, the employer ensures that the company’s future gratuity obligations are well-funded, reducing the financial strain of large one-time payouts. The scheme also offers potential investment returns on contributions, tax benefits under the Income Tax Act, and builds a sense of financial security and loyalty among employees. It is an effective way to comply with statutory obligations while promoting a supportive work environment.