Parliamentary panel bids to reduce employee's eligibility period for gratuity to one year

A Parliament panel pitched to decrease the eligibility period for the gratuity payable to an employee on termination of his employment to be reduced to one year from the current provision of five years.

The Parliamentary Standing Committee on Labour on July 31 submitted to the Lok Sabha speaker its final report on the Code on Social Security.

A gratuity is a sum amount that an organization pays to its employee when the person leaves an organization.

Read: Parl panel suggests introducing 'unemployment insurance' for unorganised sector in Code on Social Security report

“Keeping in view the nature of India’s Labour Market where most employees are employed for a short duration period only, making them ineligible for gratuity as per extant norms, the Committee desires that the time limit of five years as provided for in the Code for payment of gratuity be reduced to continuous service of one year,” the report says, according to The Hindu.

The panel proposed to provide for payment of gratuity in case of fixed-term employment on a pro-rata basis even if the period of a fixed-term contract is less than five years.

The Code on Social Security, 2019 seeks to enable the central government to fix provident fund contributions to be made by employees in different sectors and provides for payment of gratuity to fix-term employees.

The panel has made a case for "unemployment insurance and reducing continuous service period to one year from five years for getting gratuity".

Suggesting the reduction of the time period, the committee said in the report, “…most people are employed for a short duration period only, making them ineligible for gratuity as per extant norms…the committee desires that the time limit of five years as provided for in the code for payment of gratuity be reduced to continuous service of one year," according to The Print.

It asked for clearly spelling out funding pattern for schemes meant for unorganised sector workers in Code to ensure adequate accrual of funds for potent implementation of various Schemes.

"If Employees State Insurance Corporation (ESIC) accepts an employee as a healthcare beneficiary even after one month’s contribution, why should it not be the case of gratuity payments. Through various labour codes the government is supporting fixed-term employment and them why deprive workers of their legal benefits. Companies remove staff before five years just not to pay the gratuity they have deducted from his or her CTC," Amarjeet Kaur, general secretary of the All Indian Trade Union Congress told LiveMint.

(With inputs from PTI)