The Payment of Gratuity (Amendment) Bill, 2017

The Payment of Gratuity (Amendment) Bill, 2017 was introduced in Lok Sabha by the Minister for Labour and Employment

The Payment of Gratuity Act, 1972 allows for the payment of gratuity to employees in any establishment, factory, mine, oilfield, plantation, port, railways, company, or shop employing 10 or more workers.  Employees are paid gratuity if they have provided at least five years of continuous service at the time of termination.

The 2017 Bill empowers the central government to (i) notify the period of maternity leave eligible for qualifying as continuous service, and (ii) determine the amount of gratuity available to employees.

The maximum maternity leave, for the purpose of calculating continuous service under the Act, was based on the maternity leave provided under the Maternity Benefit Act, 1961.  The maximum maternity leave under the 1961 Act was changed from 12 weeks to 26 weeks by the Maternity Benefit (Amendment) Act, 2017. The Bill removes the reference to 12 weeks in the 1972 Act and empowers the central government to notify the maximum maternity leave.

Under the Act, the maximum amount of gratuity payable to an employee cannot exceed Rs 10 lakh. The Bill removes the existing ceiling and states that the ceiling may be notified by the central government.

The Payment of Gratuity Act, 1972:

The Payment of Gratuity Act, 1972 applies to establishments employing 10 or more persons. The main purpose of enacting this Act is to provide social security to workmen after retirement, whether retirement is a result of the rules of superannuation or physical disablement or impairment of vital part of the body. Therefore, the Payment of Gratuity Act, 1972 is an important social security legislation to the wage-earning population in industries, factories, and establishments.

Who Are Eligible?

The Payment of Gratuity Act, 1972 allows for the payment of gratuity to employees in any establishment, factory, mine, oilfield, plantation, port, railways, company, or shop employing 10 or more workers.

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