Gratuity. Illustration by Binay Sinha
In a move that will benefit millions of its employees, the government has increased the gratuity limit from Rs 20 lakh to Rs 25 lakh. The 25 per cent increase will be effective retrospectively from January 1, 2024.
The increase in the gratuity limit was detailed in an office memorandum dated May 30, 2024, based on the recommendations of the 7th Pay Commission. The new limits apply under the Central Civil Services (Pension) Rules, 2021, and the Central Civil Services (Payment of Gratuity under National Pension System) Rules, 2021. The decision was originally made on April 30, but it was stayed by a circular on May 7.
In March, the government increased the dearness allowance (DA) for its employees by 4 per cent bringing it up to 50 per cent. Dearness relief (DR) for central government pensioners has also seen a 4 per cent hike, reaching 50 per cent. These adjustments are effective from January 1, 2024.
This was a major relief for millions of central government employees and pensioners. Due to this hike in DA to 50 per cent, various components of a central government employee’s salary also increased.
What is gratuity?
Gratuity is the amount paid by an employer to an employee as a token of appreciation for their long-term service. To be eligible for gratuity, an employee must have worked for at least five years. The payment is made in addition to the employee’s salary, pension, and provident fund (PF). Gratuity is payable under the payment of the Gratuity Act, 1972.
How to claim gratuity?
Initiating the claim
The process begins when an eligible employee makes a formal request to claim gratuity by submitting an application in Form I to the employer. If the employee is unable to submit the form, their nominee or legal heir can do so.
Employer’s responsibility
Upon receiving the application, the employer is required to verify the claim. The employer must acknowledge receipt of the application and then calculate the gratuity amount payable to the employee. This should be done promptly to avoid any delays in disbursement.
Payment timeline
According to the Payment of Gratuity Act, 1972, the employer must pay the gratuity amount within 30 days from the date it becomes payable. If the employer fails to pay within this period, it is liable to pay interest on the amount from the due date until the payment date.
Dispute resolution
In cases where there is a dispute regarding the amount of gratuity or the eligibility of the employee, the matter can be taken up with the controlling authority under the Act. The employee can submit an application in Form N to the controlling authority of the respective region.
Appeal process
If either party is dissatisfied with the decision of the controlling authority, they can file an appeal within 60 days of the decision. The appeal can be made to the appropriate appellate authority.
First Published: Jun 04 2024 | 11:41 AM IST