9 April, 2018
The Payment of Gratuity (Amendment) Act, 2018 (“Act”) has been notified and brought into effect from March 29, 2018. Pursuant to notifications issued under the Act, the Ministry of Labour and Employment has, with effect from March 29, 2018, (i) increased the statutory ceiling for gratuity from INR 1,000,000 to INR 2,000,000, and (ii) fixed the maximum duration of maternity leave that would be considered as ‘continuous service’ for the purpose of computing gratuity to twenty six weeks.
The Act has amended the Payment of Gratuity Act, 1972 (“Gratuity Act”) to provide the Central Government with the power to prescribe, through notification in the official gazette, the statutory ceiling for gratuity payable thereunder. Further, the Gratuity Act has also been amended to allow the Central Government the power to determine the duration of maternity leave that would be considered as ‘continuous service’ for the purpose of the Gratuity Act.
The Gratuity Act is an Indian social security legislation that entitles every employee in a covered establishment, who has completed five years of service (taken as 4 years and 240 days for establishments having a six day work week and 4 years and 190 days for those working less than six days a week), upon cessation of employment, to gratuity calculated at the rate of 15 days wages for each year of completed service or part thereof in excess of six months, currently subject to a maximum of INR 2,000,000.
For further information, please contact:
Nohid Nooreyezdan, Senior Partner, AZB & Partners
nohid.nooreyezdan@azbpartners.com
Veena Gopalakrishnan, AZB & Partners
veena.gopalakrishnan@azbpartners.com
Nishanth Ravindran, AZB & Partners
nishanth.ravindran@azbpartners.com
