Payment of Gratuity (Amendment) Bill, 2018 passed, Ceiling Limit of Rs. 10 lakh Removed

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March 23, 2018

The Payment of Gratuity (Amendment) Bill, 2018 amending the The Payment of Gratuity Act, 1972 has been passed by the parliament yesterday.

The Ministry of Labour and Employment in its official statement released yesterday stated that the proposed Bill ensures harmony amongst employees in the private sector and Public Sector Undertakings/Autonomous Organizations under Government who are not covered under CCS (Pension) Rules. These employees will be entitled to receive higher amount of gratuity at par with their counterparts in Government sector.

Highlights of the Bill are:

  • The present upper ceiling on gratuity amount under the Act is Rs. 10 Lakh.  The provisions for Central Government employees under Central Civil Services (Pension) Rules, 1972 with regard to gratuity are also similar. Before implementation of 7th Central Pay Commission, the ceiling under CCS (Pension) Rules, 1972 was Rs. 10 Lakh. However, with implementation of 7th Central Pay Commission, in case of Government servants, the ceiling has been raised to Rs. 20 Lakhs.
  • That considering the inflation and wage increase even in case of
    employees engaged in private sector, the entitlement of gratuity has been revised in respect of employees who are covered under the Payment of Gratuity Act, 1972. Accordingly, the Government initiated the process for amendment to 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.
  • In addition, the Bill also envisages to amend the provisions relating to
    calculation of continuous service for the purpose of gratuity in case of female employees who are on maternity leave from ‘twelve weeks’ to such period as may be notified by the Central Government from time to time.
  • After enactment of the Act, the power to notify the ceiling of the amount of
    gratuity under the Payment of Gratuity Act, 1972 shall stand delegated to the Central Government so that the limit can be revised from time to time keeping in view the increase in wage and inflation and future pay commissions.

The Bill can be accessed here.