Payment of Gratuity (Amendment) Act, 2018 (Download PDF)

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Payment of Gratuity (Amendment) Bill was passed by Lok Sabha on 15th March 2018 & by Rajya Sabha on 22nd March 2018. It was brought in force on 29th March 2018. Bill will ensure harmony amongst employees in pvt. sector & in Public Sector & in Public sector Undertaking/Autonomous Organizations under Government who are not covered under CCS (Pension) Rules.

Image of Salient features of the payment of gratuity Act

Image of Salient Features of the Payment of Gratuity Act

Image of Salient features of the payment of gratuity Act

Key-points of Bill:

  • Social security after retirement:

    • Act applies to establishment employing 10 or more persons.

    • Its objective is to provide social security to workman after retirement, whether retirement is a result of superannuation or physical disablement or impairment of vital part of body.

  • Gratuity amount raised to 20 lakh:

    • W/implementation of 7th Central Pay Commission (in case of government servants) is raised to Rs. 20 lakhs.

    • Maximum limit of gratuity may be notified by Central Govt. from time to time.

    • Govt. has issued notification specifying maximum limit to Rs. 20 Lakh.

  • Calculation of Continuous Service for Gratuity: Bill envisages to amend provisions relating to calculation of continuous service for purpose of gratuity in case of female employees who are on maternity leave from ‘twelve weeks’ to such period as may be notified by Central Govt. from time to time. This period is notified for twenty-six weeks.

Benefits of Bill

  • These employees will be entitled to receive higher amount of gratuity at par w/their counterparts in Govt. sector.

  • Bill envisages amending provisions relating to calculation of continuous service for purpose of gratuity in case of female employees who are on maternity leave from twelve weeks to such period as may be notified by Central Govt. from time to time.

  • It will lead to increase in disposable income in hands post-retirement & tax outgo will reduce & further bring easiness & help gratuity keep pace w/inflation.

What is Gratuity?

  • Gratuity is monetary benefit given by employer to his employee at time of his/her retirement. It is defined plan where employee does not make any contributions.

  • Amount of gratuity is directly proportional to tenure of service, & to last drawn salary. It is given at rate of 15 days of last drawn salary for each year of service.

- Published/Last Modified on: July 13, 2018

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