The major recent pronouncement by the government is to effect drastic changes in gratuity rules that would go on to affect thousands of employees across the country. As far as from now onward, certain workers may cease to be eligible for gratuity benefits under the new rule, much to the fright of employees who are anyway nearing retirement.
What’s New?
By the new notification, which stipulates that employees not meeting continuous service will be ineligible for gratuity. Gratuity is granted under the Payment of Gratuity Act, 1972, to employees who complete a minimum of five years of continuous service in an establishment. However, by the changes introduced in contrast, the definition for continuous service has been somewhat tightened.
According to the updated definition, unauthorized extended leave, repeated short-term resignations, casual assignments without formal renewals, and certain categories of part-time work will, therefore, disqualify such workers from receiving gratuity benefits.
Who Would Be Affected?
- Contract Workers: Employees on short-term contracts that do not provide for renewal will not qualify for gratuity unless there is formal renewal of the contract without substantial absence in between.
- Part-time Employees: Those who work on irregular hours or days may never fulfill the minimum continuous service condition.
- Employees on Frequent Breaks: Workers who have resigned and joined back in a five-year span without proper continuity of service may also lose entitlement to gratuity.
- Employees Terminated on Disciplinary Grounds: Those terminated for misconduct or violation of a company policy may be denied gratuity.
Why The Change?
The change, in the opinion of the government, is intended as a measure against the misuse of gratuities and ensuring that it is the genuinely long-serving employees who benefit from the scheme. The officials argue that gratuity is a reward for fidelity and long service – definitely not for short-term or erratic employment.
What Should Employees Do?
Experts advise employees to:
- Regularly check their employment status and contracts.
- Ensure continuous service without big gaps.
- Keep all documents regarding extensions and renewals relating to their contract.
- Seek clarification regarding gratuity eligibility status with the HR department in case of uncertainty.
If they do not adhere to the new conditions, they would indeed be very much at risk of losing out on a generous retirement benefit-very often several lakhs of rupees.
Conclusion
The trigger for adjustment in the gratuity rule was a rousing wake-up call for employees to monitor their employment history and conditions on an urgent basis. Well, it sounds a little rude, but staying informed and proactive will help avoid any errors in the deserving retirement cash.
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