Why Companies can not take Gratuity Insurance directly from Insurance Companies without an Approved Gratuity Fund established under Irrevocable System ?

The Payment of Gratuity Act, 1972 is applicable to all establishments (i.e. MNC's, Private Schools, Private Colleges, Private Universities, NGO's, Autonomous Bodies and Other business entities) having more than 10 employees. Gratuity is a statutory right of employee whoever completes 5 years in the same Establishment and is a terminal benefit, it means gratuity amount will be determined when the monthly terminal wages of the employee are known to Establishment. The cost is to be borne by the Employer and not by the Employee hence it can neither be shown as deduction from employees salary nor as a Part of CTC of employee. 

Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years,- 

(a) on his superannuation, or 

(b) on his retirement or resignation, 

(c) on his death or disablement due to accident or disease

Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement