/New rule coming? You may soon be eligible for gratuity even without 5 years on the job, says report

New rule coming? You may soon be eligible for gratuity even without 5 years on the job, says report

With shorter job tenures increasingly becoming more common in India, the government is considering easing a key eligibility requirement for gratuity payment, Mint has reported.

Gratuity is paid by a company to an employee for the services rendered by him/her during the period of employment. The amount is generally equivalent to 15 days of pay for each year an employee has worked at an company.

Under current rules, an employee has to work for a company/organisation for five continuous years to be eligible for gratuity payment. According to reports, there is now a push in government circles to cut the five-year criterion to a shorter period — between one and three years.

Lately, various quarters have joined forces to push the issue in view of falling job security and rising number of contractual employees — two factors that often deprive many workers of gratuity payouts.

The current 5-year threshold is obsolete and not in the interest of workers, the report said citing labour market experts. There are also widespread allegations of underhanded cost-cutting means being put to use by many companies riding on this specific criterion.

Trade unions allege that many companies have turned it into a fine art of firing workers shortly before they become eligible for gratuity. This helps these companies cut costs, but comes at a great cost to those at the receiving end — the workers.

The 5-year rule is a relic from a time when the premium was on long-term employment; but the realities have changed now and a 2- to 3-year period looks like the best workable solution, a staffing company CEO told Mint.

The nature of jobs in India is changing, especially more so in Covid‘s wake and fixed-term jobs are about to see a sharp rise, said a government official. The Industrial Relations Code has already put a premium on such jobs, and creating employment is likely to soon become more important than protecting employment, he added.

As of now, according to the report, two options are being considered — either a proportional change for some sectors, or bringing down the time for all sectors. The second option has garnered more support, it said.

The Parliamentary standing committee on labour has also made common cause with those who want the 5-year period to be cut, and suggested that it be made part of the upcoming social security code.

It makes a case for “unemployment insurance and reducing continuous service period to one year from five years for getting gratuity” — pitching for reducing minimum service of five to become eligible for gratuity, to a year.

The final report on the code has already been adopted by the committee. The code — which will replace nine laws related to PF, maternity benefits, gratuity as well as social security of unorganised workers — is likely to be passed during the forthcoming monsoon session.

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