Gratuity increased to 20 lakhs
5 minutes read

Gratuity increased to 20 lakhs

Hello and welcome. In this post, we will discuss the recent news about gratuity. The ceiling for gratuity is now 20 lakhs.

The bill was passed by the Lok Sabha on 15th March 2018 and by the Rajya Sabha on 22nd March 2018.

[Update: Mar 29th, 2018] – The payment of the Gratuity Amendment Act has been passed by both houses of parliament. It is applicable from 29th Mar 2018.

Important point:

  • Employees retiring on 31st Mar 2018 are also eligible for higher gratuity.

What is the Payment of Gratuity Act?

The Payment of Gratuity Act is important social security legislation to the wage-earning population. The Act provides social security to workmen after their retirement. Retirement can be a result of superannuation or physical disablement or impairment of their vital part of the body.

Establishments employing 10 or more persons will be applicable for the Payment of Gratuity Act, 1972.

What is the increased ceiling on gratuity amount under the Act?

The present upper ceiling is Rs. 10 Lakh on gratuity amount under the Act.

The provisions for Central Government employees under Central Civil Services (Pension) Rules, 1972 with regard to gratuity are also similar. Before the implementation of the 7th Central Pay Commission, the ceiling under CCS (Pension) Rules, 1972 was Rs. 10 Lakh. With the implementation of the 7th Central Pay Commission, the gratuity ceiling for government employees went up to Rs 20 lakhs.

Post this, the consideration was for private-sector employees who had to face the constant increase in the inflation rate. So, the Government then took the decision to increase the ceiling for the private sector too. Accordingly, the Government initiated the process for the amendment to the Payment of Gratuity Act, 1972 to increase the maximum limit of gratuity to such amount as may be notified by the Central Government from time to time.

This bill ensures harmony between employees in the Private and Public Sector Undertakings / Autonomous Organizations under Government who don’t come under CCS (Pension) Rules. These employees will now receive a higher amount of gratuity at par with the Government sector.

Provisions related to female employees

The Bill expects to amend the provisions relating to the calculation of continuous service for the purpose of gratuity in the case of female employees who are on maternity leave, as may be notified by the Central Government from time to time.

After the enactment of the Act, the power to notify the ceiling of gratuity under the Act will still be with the Central Govt. So, the limit can be revised from time to time, keeping in view the increase in wage and inflation.

This comes to the end of our post on the recent news. Let us know your opinion on this by commenting below.

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