Gratuity payment rules: Will Modi govt reduce 5 years limit to 1 for employees?

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New Delhi | Updated: October 30, 2019 12:35:49 PM

Gratuity Payment Rules: Several reports claim that Narendra Modi government at the Centre will reduce the eligibility for gratuity payment to employees from five years to one.

code on social security 2019Gratuity payment: Government may introduce Code on Social Security Code. Representational Image

Gratuity Payment Rules: Several reports claim that Narendra Modi government at the Centre will reduce the eligibility for gratuity payment to employees from five years to one. This may happen through a Bill on Social Security expected to be introduced by the Government in Parliament in the Winter Session. However, the government has not formally made any announcement regarding reducing the eligibility from five years to one. There is also no confirmation on whether the Government will introduce such Bill in the upcoming session of Parliament.

Draft Code on Social Security, 2019

Recently, the Union Ministry of Labour and Employment had put a draft ‘Code on Social Security 2019’ for suggestions/inputs/comments from the public and all concerned stakeholders as a part of pre-legislative consultative process. The last date for sending suggestions to the ministry in a prescribed format ended last week (October 25).

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What draft ‘Code on Social Security 2019’ said on Gratuity: Key points

The draft code doesn’t propose to reduce the eligibility for Gratuity payment from five years to one. It says:

Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years,-

(a) on his superannuation; or (b) on his retirement or resignation; or

(c) on his death or disablement due to accident or disease; or (d) on termination of his contract period under fixed term employment; or

(e) on happening any such event as may be notified by the Central Government

The draft Code further says:

  • The completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement or expiration of fixed term contract or happening of any such event as may be notified by the Central Government.
  • The draft code says, “for every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days’ wages or such number of days as may be notified by the Central Government, based on the rate of wages last drawn by the employee concerned.”
  • In case of piece-rated employee, daily wages shall be computed on the average of total wages received by him for a period of three months immediately preceding the termination of his employment, and, for this purpose, the wages paid for any overtime work shall not be taken into account.
  • In case of an employee who is employed in a seasonal establishment and who is not so employed throughout the year, the employer shall pay the gratuity at the rate of seven days’ wages for each season.
  • Rejected by BMS

The Bharatiya Mazdoor Sangh has rejected the draft Code on Social Security as a “weak-cut-and-paste” job. It has claimed in a letter to the labour ministry that the draft is not Universal. The labour union has demanded that the Gratuity eligibility should be reduced from five to one year.

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