This development, therefore, is an important milestone in labor welfare issues; there are reports saying that the Government of India is considering some changes in the gratuity laws, as employees of certain categories might be declared ineligible for gratuity. Gratuity is in the nature of a retirement allowance, lodged in the hands of an employee for a longer period of service as under the provisions of the Payment of Gratuity Act, 1972, and is regarded as a token of gratitude. With the changed proposals, some category of employees is supposed to be ineligible for gratuity.
What Is Gratuity?
Gratuity in a lump sum amount paid by an employer to the employee who has offered continuous service for not less than five years. Gratuity is generally paid at the time of retirement, resignation, death, or disablement, and is calculated with reference to the last salary drawn and the number of years of service.
What Is Going To Be Changed?
Presently, it seems to the Government that the eligibility norms are under revision, especially concerning those sectors that have a very high employee turnover rate. So, as per sources, the changes would be as follows:
1. Minimum Service Period Might Be Amended:
The present five years min-service period requirement may be altered in respect of certain sectors, especially gig economy and private start-ups, where employment relationships are for the most part short-term and transitory in nature.
2. Exclusion Depending Upon the Nature of Contract:
A contract worker with a short term contract or under third-party payrolls may literally not qualify for gratuity unless such employees are explicitly covered under new contract conditions.
3. Changes Affecting Daily Wage and Part-Time Workers:
There is a chance that the daily wage earners or part-time employees might be excluded from gratuity coverage if their mode of employment does not conform to certain criteria.
4. Revised Gratuity Calculation Methodology:
This concern is that the method of gratuity calculation would be aligned with the wage structure as per the Code on Wages 2019.
Who May Be Affected?
- Employees in the private sector on temporary contracts
- Outsourcing-based workers
- Gig and platform economy workers (delivery executives or app drivers, for instance)
- Employees who have undergone breaks in service on account of project-based assignments
What Should Employees Do?
It is suggested to employees that they:
- Carefully review the employment contract
- Check with HR or seek advice from legal advisorsfor guarantee eligibility
- Follow updates released by the Ministry of Labour and Employment
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