Editorial: Porting gratuity

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Published: July 23, 2015 12:34:45 AM

Commendable labour reform if it happens.

Changes in labour laws that are seen as impacting workers adversely have always been difficult to push for any government and this is why prime minister Narendra Modi, while addressing the Indian Labour Congress on Monday, said that no law relating to the workforce would be changed without consultations with trade unions. While those related to making hire-and-fire easier, that could improve the ease of doing business scenario in the country, would be contested by the unions tooth and nail, there are some changes proposed by the government, probably to test the waters, that may sail through without much of a problem. These include enhancing maternity leave for working women from three months to six months and doubling bonus payments; the most worker-friendly one is to make gratuity payments portable. The move will allow workers to port their gratuity payment from one company to another quite on the lines of provident fund. As gratuity, a worker gets 15 days of his basic salary and dearness allowance for each completed year of service, provided he completes five years in a company. Employee groups have been seeking a reduction in the five-year continuous clause.

If the worker is allowed to port his gratuity benefits, then the five-year rule would have no meaning. The big advantage for the worker if and when this scheme becomes operational is that he will get a lumpsum when he retires, irrespective of whether he has changed jobs or not. This will be a big relief for the employees as changing jobs is quite normal in the private sector and any shift before completing five years in an organisation means losing gratuity. With portability, the money that the worker contributes each year as his gratuity contribution will be transferred to the government quite on the lines of tax deduction at source (TDS) payments. Besides benefiting workers, the annual gratuity collections across industries would provide the government with a huge corpus that could be used for developmental work. But for this to happen, the government needs to create a body quite on the lines of the EPFO where all data of workers across the country would reside. That should not be too difficult since most people have Aadhaar numbers now.

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