Amendments In Payment Of Gratuity Act: Proposed

• Posted By Amritesh
• On February 26th, 2017
• Comments: 30 responses

Gratuity Payment Act is expected to be amended soon. In the recently concluded tripartite meeting it has been decided that the Tax Free Gratuity limit to be enhanced to Rs 20 lakhs from Rs 10 lakhs to bring it at par with the Government employees who enjoy similar benefits as per the recommendations of the 7^th Pay Commission. Official Notification on the same is expected soon. Few more amendments in Payment of Gratuity Act has been proposed.

The recommendation to increase the Tax Free Gratuity to Rs 20 lakhs has been agreed upon by the Labour Ministry and the Central Unions. The move will benefit Individuals employed in the private sectors. Along with it, host of other reforms were also suggested to the Ministry of Labour by the Central Unions which are discussed below. It has also been proposed to make the amendment applicable from 1^st January, 2016 in line with the norms set for Government employees.

Gratuity Act,1972

Benefits Calculation Under Gratuity Act

Demands raised/proposed by the Labour Unions to the Labour Ministry:

Proposed Amendments in Payment of Gratuity Act (Calculation)

The Labour Unions have called for changes in the wage rates for calculation of Gratuity. It has been recommended to replace the 15 days wage period with 30 days for the calculation of Gratuity. The recommendation, if implemented will double your Gratuity Benefits.

Proposed Amendments in Payment of Gratuity Act (Applicability)

Labour Unions have also suggested for the removal of minimum of 10 employees clause for applicability of the Act in Establishments. Thus more Individuals could be covered under the Act and will be eligible receive the Benefits prescribed as per the Act.

Proposed Amendments in Payment of Gratuity Act (Eligibility)

Recommendations have also been made to do away with 5 years service clause to be eligible for the Gratuity. This would benefit employees who are looking to switch jobs after serving for short tenure. Proposal also has been made to bring down the service period to 3 years and include provision to transfer gratuity benefits when an employee switches jobs.

The above recommendations are aimed at bringing the employees in Formal Sector at par with Government employees along with improvement in the present Benefit structure for the employees.