Govt. to make Major Changes in GRATUITY Payment Rules for EMPLOYEES! Details

According to latest media reports, the central government is considering relaxing the minimum eligibility condition for gratuity payments to employee. The central govt. Is planning to reduce the threshold from five years of continuous employment since there is growing demand for making the gratuity eligibility criteria shorter. The government might change the eligibility criteria to continuous employment between one to three years instead of Five. 

Gratuity payments made to staff are equivalent to 15 days of salary for each year spent by an employee at an organization. 

"There is demand from several quarters to lower the gratuity threshold. How to lower the five-year threshold is being discussed and it is likely to be lowered," a government official said as per a report by Mint.

Labour market experts believe that the five-year threshold is outdated. "The five-year threshold was formulated decades ago to promote long-term work culture. The reality is different now. While gratuity threshold of one year may not be feasible, 2 to 3 years is a better option," RP Yadav, chief executive of Genius Consulting, a staffing company told Moneycontrol. 

Meanwhile, a government official felt it is the need of the hour considering the changing nature of jobs. "The government has two options — either reduce the threshold on a pro-rata basis or proportional change for a few sectors, or a reduction in the five-year threshold for all sectors," the govt. Official told Moneycontrol, and added that the second option is more preferred and has more takers.

The Parliamentary standing committee noted in its report that this provision will also incentivize employers to terminate employees before they complete five years. 

"The benefit of the pro-rata gratuity should be extended to the contract labour if they serve for the full period of the contract irrespective of the change of contractors. The principal employer should be liable to pay pro-rata gratuity for the term of the contract and it may be paid along with the last wages," the report noted.

The Code of social security report 2019 had included these recommendations. It was submitted to Lok Sabha Speaker Om Birla on July 31, 2020.