Parliament passes Payment of Gratuity (Amendment) Bill, 2017

The Parliament has passed Payment of Gratuity (Amendment) Bill, 2017 to empower government to fix period of maternity leave and tax-free gratuity amount with an executive order. The Bill seeks to amend Payment of Gratuity Act, 1972 on two issues related to maternity leave and ceiling of gratuity payable to an employee.

Payment of Gratuity Act, 1972

It allows for payment of gratuity to employees in any establishment, factory, mine, oilfield, plantation, port, railways, company, or shop employing 10 or more workers.  Under it, employees are paid gratuity if they have provided at least 5 years of continuous service at time of termination. Gratuity is calculated based on 15 days of wages for each year of continuous and complete service, subject to a ceiling.

Key Features of Bill

The Bill empowers central government to notify period of maternity leave eligible for qualifying as continuous service and determine amount of gratuity available to employees. The maximum maternity leave, for the purpose of calculating continuous service under Act, was based on maternity leave provided under the Maternity Benefit Act, 1961.  The Bill removes the reference to 12 weeks in Maternity Benefit Act, 1961 and empowers central government to notify the maximum maternity leave. Under the Act, maximum maternity leave was 12 weeks and was changed to 26 weeks by Maternity Benefit (Amendment) Act, 2017.
The Bill removes the existing ceiling of Rs 10 lakh amount of gratuity payable to an employee and states that the ceiling may be notified by the central government. It will allow revision of the limit from time to time with the increase in wage and inflation and future pay commissions. The implementation of 7th Central Pay Commission, has increased ceiling gratuity for Central Government employees from Rs. 10 lakh to Rs. 20 lakh.

Month: Current Affairs - March, 2018