Gratuity Act: The government has announced major changes in the labor law. Union Labor Minister Mansukh Mandaviya said on Friday that there is a proposal to make changes in the labor law to provide social security to crores of workers and employees of the country. Under this, now fixed term employees will be given the benefit of gratuity only after working for one year. Generally, this benefit was given only to those who had been employed continuously for at least 5 years. The government has said that under the new provision, such private sector employees who work on contract will also be covered.
Gratuity is a kind of reward for being associated with the company for a long time. Under the current provision, if an employee is associated with the same company for 5 continuous years, then he is given a lump sum amount as gratuity on leaving the company or on retirement. Gratuity law has been in force in the country since 1972. There is a proper formula for calculation of gratuity. However, this formula is currently for calculation of gratuity for 5 years. The government has announced on Friday to give gratuity even on one year’s service, no formula has been given yet.
Earlier also gratuity was given in one year
Even before today, under the Gratuity Act, 1972, there is a provision to give gratuity to employees even after working for a year. However, a provision has been made for this. If an employee dies within a year, then the gratuity money is given to the family of that employee. Even if someone becomes disabled, they are given gratuity money.
When does gratuity apply?
Gratuity is given to those working in a company or institution where at least 10 employees work. One thing should always be remembered that training time is not included in the time period of gratuity. When the new provision is implemented, employees will not need to work continuously for 5 years, but will get the benefit of gratuity only after working for a year. The formula for determining gratuity has not been disclosed yet, but it is being speculated that its formula will also remain the same as the current calculation.
How is gratuity calculated?
Gratuity is calculated according to a formula. In this, 15 times of the money made by combining the last monthly salary i.e. basic salary and dearness allowance is taken. Now this amount is multiplied by the period of service. The number resulting from this is divided with 26 i.e. the formula is (last monthly salary ×15×years of service)/26. Now whatever amount comes forward, the same is paid.
Suppose someone’s last salary is Rs 1 lakh and he has worked for 5 years, then the gratuity will be (1,00,000×15×5)/26 i.e. Rs 2,88,461. This means that the employee will be paid this amount.
It is not necessary to complete 5 years for gratuity
Even though there is a provision for service conditions of 5 years under the Gratuity Act, 1972, in reality this period is not 5 years. If an employee works continuously for 4 years and 240 days with the same employer or company (where the rule of working 6 days a week is applicable), then his service will be considered to have completed 5 years. Similarly, if someone works in a company where there are 5 working days in a week, then the service of those who work for 4 years and 190 days will be considered as completion of 5 years. However, under both these provisions, service of less than this number will not be considered eligible under gratuity.
What is the provision on fixed term?
Under the provisions of the Industrial Relations Code 2020, if a private sector fixed term contract employee has been hired for 1 year or more, then he will be given the benefit of gratuity at a proportionate level, whether the employee has completed the period of 5 years or not. The government has implemented this provision in the new Labor Code and soon these provisions will become fully effective.
