Good news for salaried employees! Central government is likely to cut threshold for gratuity
The government is considering to reduce existing 5 year-limit for employees and easing the minimum eligibility condition for gratuity payments as shorter tenures are increasingly becoming the norm in India, government officials said.
The plan is to lower the threshold from five years of continuous employment to between one and three years amid growing demand to make the gratuity eligibility criteria shorter.
The development comes days after a report on social security code by the Parliamentary Standing Committee on Labour recommended that the eligibility period for gratuity payable to an employee on termination of his employment should be cut down to one year from the current norm of five years.
According to the Parliamentary Standing Committee report “There are two options-pro-rata basis or proportional change for a few sectors, or a reduction in the five-year threshold for all sectors. Demand for the second option has more takers in the normal discourse with experts and economists. The standing committee has suggested to lower it to 1-3 years from the current five years,” the report also quoted the official as saying.
The Committee in its report has also pointed out that this employment period provision also incentivises employers to terminate employees before the completion of five years.
One more recommendation made by the committee is that gratuity should be made payable to all employees e.g. contract labourers, seasonal workers, piece-rate workers, daily and monthly wage workers.
“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.
According to Moneycontrol, the recommendations were part of the report on the Code of Social Security, 2019. It was submitted to Lok Sabha Speaker Om Birla on July 31, 2020.
Gratuity payments to staff are equivalent to 15 days of salary for each year an employee has spent at an organisation.