The Union Cabinet, chaired by Prime Minister Narendra Modi, on Tuesday gave its approval for introduction of the Payment of Gratuity (Amendment) Bill, 2017 in the Parliament. With implementation of the 7th Central Pay Commission, the gratuity ceiling for government servants got revised, from Rs 10 lakh to Rs 20 lakh. The Amendment seeks to revise the ceiling for employees in the private sector too, considering inflation and wage increase. Thus, the Amendment will increase the maximum limit of gratuity of employees, in the private sector and in public sector undertakings/ autonomous organizations under the government who are not covered under CCS (Pension) Rules, at par with the Central government employees.
It may be noted that the Payment of Gratuity Act, 1972 applies to establishments employing 10 or more persons. The main purpose for enacting this Act is to provide social security to workmen after retirement, whether retirement is a result of the rules of superannuation, or physical disablement or impairment of vital part of the body. Therefore, the Payment of Gratuity Act, 1972 is an important social security legislation to wage earning population in industries, factories and establishments.
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 the 7th Central Pay Commission, the ceiling under CCS (Pension) Rules, 1972 was Rs 10 lakh. However, with implementation of the 7th Central Pay Commission, in case of government servants, the ceiling now is Rs 20 lakh, effective from 1.1.2016.
Therefore, considering the inflation and wage increase even in case of employees engaged in private sector, the government is of the view that the entitlement of gratuity should be revised for 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.