This landmark ruling by the High Court has been hailed for the benefit of several millions of salaried workers across the country. The gift rules were altered and relaxation extended to some workers who are just at the age of retirement or withdrawing after a very long service, thus grant of enhanced payouts. It was viewed as a step in favor of the welfare of the employees and in the interest of financial justice.
What Is Gratuity?
It is a lump sum amount paid by the employer to an employee for appreciation of services rendered for a long duration, normally considered to be more than five years. It may either be a government employee or a private sector employee as mentioned under the Payment of Gratuity Act, 1972.
High Court Judgment – What Is It?
Consequent to the ruling of the High Court, two paramount issues were emphasized:
1. Allowances to be Included in Calculation of Gratuity
- Till such time, the basis of an award for gratuity had been the basic pay. Once an allowance had been granted by means of the High Court’s decision to add the allowance, namely, the dearness allowance (DA) or retaining allowance, to the gratuity payment calculation, however, that would in effect multiply the amount of gratuity which would be payable, thereby increasing the pay-out of gratuity.
2. Reduction in Minimum Service Requirement in Certain Situations
- The court held that, on humanitarian grounds, gratuity should be allowed for employees who have served ever less than five years due to termination, or disability, or closure of the company. This implies that more employees in unstable sectors can become entitled to gratuity.
How Much More Is Debited From Employees?
The payout, as a matter of fact, depends on the salary structure and years of service of an individual; however, it is being suggested by industry experts that the average amount of gratuity can be raised by between 15 and 25 percent by the new act. In the case of a middle-level employee who has passed 20 years of service, they shall receive an extra sum of ₹1.5 to ₹3 lakh in their gratuity.
Who Benefits from This Ruling?
- Central and state government employees
- Private sector workers covered under the Gratuity Act
- Employees nearing retirement or planning to resign after long service
Conclusion
The decision of the High Court to revise gratuity rules is a great victory for the employees ensuring fair compensation and wider coverage. Now that employers are implementing the changes, employees should review their gratuity calculations and consult their respective Human Resources department to understand what changes have taken place pertaining to their rights.
Also Read:8th Pay Commission News: Central Employees To Get Higher Pay And Perks