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Parliament passes Payment of Gratuity (Amendment) Bill

The Parliament has passed the Payment of Gratuity (Amendment) Bill that will empower the government to fix the amount of tax-free gratuity and the period of maternity leave with an executive order.

Mar 22, 2018 15:35 IST
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The Indian Parliament on March 22, 2018 passed the Payment of Gratuity (Amendment) Bill that will empower the government to fix the amount of tax-free gratuity and the period of maternity leave with an executive order.

The bill was passed by the upper house of the Parliament, Rajya Sabha, which has failed to function properly since the past two weeks due to protests by various parties. The House passed the key bill without discussion.

Significance

The amendment will benefit workers of private and public sector companies, as it will provide them with social security after retirement.

What is Gratuity?

• It is a benefit received by an employee for services rendered to an organisation.

• For companies covered under the Gratuity Act, this benefit is paid when an employee completes five or more years of service with the employer.

• The Gratuity Act applies to establishments employing 10 or more persons.

• According to the current rules, the amount of gratuity is determined directly by the tenure of service and also by the last drawn salary.

• The gratuity is given at the rate of 15 days of salary for each year of service.

 



Key Highlights

• The bill moved by Union Labour Minister Santosh Kumar Gangwar was passed by a voice vote.

• The lower house of the parliament, Lok Sabha had given its approval to the important bill last week.

• The passing of the bill will enable the government to enhance the maximum limit of tax-free gratuity to Rs 20 lakh from the existing Rs 10 lakh for employees falling under the Payment of Gratuity Act.

• The bill will also allow the increase of cap from time-to-time in the gratuity amount without changing the law.

• It will also allow the government to fix the period of maternity leave for female employees as deemed to be in continuous service in place of the existing 12 weeks.

Background

After the implementation of the 7th Pay Commission, the ceiling of gratuity amount for the central government employees has doubled to Rs 20 lakh. The payment of Gratuity bill is in tandem with the new pay commission.

The amendment to the payment of gratuity law comes in the backdrop of Maternity Benefit (Amendment) Act, 2017 enhancing the maximum maternity leave period to 26 weeks.

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