New Delhi: In the changing employment scenario where job tenures are getting shorter along with the declining job security and rise of contractual employment, there are chances that the current five year eligibility period for gratuity is reduced. Also Read: Digital Payment Failure? RBI Introduces Online Dispute Resolution System For All Your Grievances

As reported by the business daily Mint, the government is mulling to relax the 5-year threshold for turning eligible. The current five -year period is obsolete and not in the interest of workers, the report stated quoting labour market experts. There are also concerns regarding cost-cutting measures being implemented by many companies taking advantage of this criterion.  Also,trade unions noted that some firms sack workers just before becoming eligible for gratuity payments to save on costs. The suggestion has come from the standing committee in slashing the period to one-three years from the current five years.
Experts in the labour market believe the current five-year rule conceptualised long time back, needs a revision now. Gratuity payment is governed by The Payment of Gratuity Act 1972.

Here are the current rules on gratuity.

  • You receive gratuity only on completion of minimum five years with the same organisation.

  • This employment should be continuous in the organisation and without any gap.

  • You are eligible for gratuity for the services rendered during the period of employment. The amount is generally equivalent to 15 days of pay for each year an employee has worked at a company.

  • Note, those employee who turn disable as a result of sickness or an accident, whether or not she has completed her five years’ service with that employer is also eligible to receive the gratuity.

  • If you are a government employee then the amount is fully exempt.

  • For a non-government employee, the least of the following is exempt from tax --Eligible calculated gratuity amount or, ₹20 lakh or, Gratuity actually received.

  • Also, note that any sum received over and above the tax exempted gratuity amount will be taxed as per the applicable tax slab rate.

  • In case of the death of an employee, the nominee shall receive the gratuity. The condition of minimum tenure of completion of five years of service does not apply in this case.

  • As per The Payment of Gratuity Act, every factory, mine, oilfield, plantation, port and railway company or shop employing 10 or more persons, or were employed, on any single day of the preceding 12 months has to compulsorily pay gratuity to its eligible employees.