THE GIFT IN FORM OF GRATUITY FOR THE PRIVATE SECTOR EMPLOYEES FROM THE MODI GOVERNMENTNovember 16, 2018
The private sector employees will be also given the benefit of gratuity, as a plan will be implemented before the Lok Sabha elections next year. Right now it is just a plan that is under consideration and will be implemented after the ground work or calculations has been done and feedback from the various industries has been taken.
Gratuity can be defined as the monetary benefit given by the employer to his employee at the time of retirement. In layman’s word it is the reward given to the employee for its loyalty. The employee gets the gratuity when he retires, resigns or retrenches. It is mandatory to pay gratuity in monetary terms to the employees as per the Payment of Gratuity Act 1972. The act is applicable to companies or establishments who have 10 or more employees. The act works to provide safeguard to the employees after retirement.
GRATUITY CALCULATION- Prime Minister Narendra Modi led Union government is drafting a plan to give the gift of gratuity to the private sector employees. The time limit of five years of employment at a place will be reduced for the gratuity payment, it will become three. The Ministry of Labour has asked for the feedback from the various industries on the time limit and after analyzing the feedback the final call will be made. This will benefit quite a many employees who often change the organization before the term of five years.
The method of calculation of gratuity will also be changed. The calculation of gratuity depends on two factors last drawn salary and the years of service. Thus the amount of last drawn salary is multiplied by years of service and then this is multiplies by 15/26. Thus is the salary is Rs. 100,000 and the years of service is 20 then the amount will be 1,153,846. The time period of six months or more is considered as a full year in this formula.
BENEFIT OF TAX: The entire amount of gratuity that has been received on retirement or death is eligible for income tax rebate for the government employees and the private sector workers who are covered under the Payment of Gratuity Act, 1972.