Gratuity refers to a sum of money given by an employer to an employee as a token of appreciation or recognition for the employee's long-term service or contribution to the company. It is typically provided when an employee retires, resigns, or completes a certain number of years in service with the company. Gratuity is often calculated based on the employee's salary and the number of years they have worked for the employer and is usually governed by labor laws or company policies.