How the Gratuity Amendment Bill Doubles Benefits for Employees Across Sectors

The Payment of Gratuity (Amendment) Bill, 2017

The Payment of Gratuity (Amendment) Bill, 2017 has been passed by Parliament on March 22, 2018, paving the way for doubling the limit of tax-free gratuity to Rs 20 lakh and empowering the government to fix the ceiling of the retirement benefit through an executive order. The Rajya Sabha passed the bill, which was approved by the Lok Sabha on March 15, 2018. Besides enabling the central government to fix the ceiling of tax-free gratuity, the bill will also empower it to fix the period of maternity leave through an executive order. The Payment of Gratuity (Amendment) Bill, 2017 was introduced by Labour Minister Santosh Kumar Gangwar in the Lok Sabha on December 18, 2017.

Impact on Employees

The bill ensures harmony amongst employees in all sectors, including the private sector and Public Sector Undertakings/Autonomous Organizations under the Government who are not covered under CCS (Pension) Rules. Employees of the private sector and Public Sector Undertakings/Autonomous Organizations under the Government will now be entitled to receive a higher amount of gratuity at par with their counterparts in the Government sector.

Revised Gratuity Ceiling

The revised upper ceiling on the gratuity amount under the Payment of Gratuity Act is Rs. 20 lakh, which was Rs. 10 lakh earlier. For Central Government employees, the provisions regarding gratuity are also similar under Central Civil Services (Pension) Rules, 1972. Before the implementation of the seventh Pay Commission, the ceiling under CCS (Pension) Rules, 1972 was Rs. 10 lakh, which was raised to Rs. 20 lakh by the seventh Pay Commission.

The Payment of Gratuity (Amendment) Bill, 2017 marks a significant change in the gratuity landscape in India, particularly benefiting employees in both the private and public sectors. With the revised upper ceiling now set at Rs. 20 lakh, doubling the previous limit, employees are poised to receive higher gratuity amounts upon retirement. This amendment aligns the gratuity benefits across sectors, ensuring parity between employees in different organizational setups.

For private sector and Public Sector Undertakings/Autonomous Organizations under the Government not covered by CCS (Pension) Rules, this bill brings about a positive change by granting them access to increased gratuity benefits. The empowerment of the central government to determine the tax-free gratuity ceiling and maternity leave period through executive orders streamlines the process and enhances employee welfare.

Central Government employees will also benefit from similar provisions under the Central Civil Services (Pension) Rules, 1972, where the gratuity ceiling has been raised to Rs. 20 lakh, in line with the seventh Pay Commission's recommendations. This move ensures that employees across sectors are fairly compensated upon retirement, fostering a more equitable work environment.