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Gratuity payment terms | Parliamentary panel suggests easing 5-year employment criteria to a year

One of the points of arguments is that some employers could unfairly terminate employees before they complete the 5-year employment period provision.

August 06, 2020 / 04:46 PM IST

The Parliamentary Standing Committee on Labour, in a recently tabled report, has recommended that the existing period of five years of continuous service for gratuity payment to employees should be reduced to one year.

The suggestion came amid a large number of layoffs owing to the widespread disruption due to the coronavirus pandemic. It was also pointed out that this employment period provision also incentivises employers to terminate employees before the completion of five years.

The committee, chaired by Biju Janata Dal MP Bhartruhari Mahtab, highlighted that the nature of the country's labour market must be kept in mind here, where most people are employed for short durations. Hence, most people would find themselves unable to avail gratuity benefits due to the five-year continuous employment condition.

The recommendations were part of the report on the Code of Social Security, 2019. It was submitted to Lok Sabha Speaker Om Birla on July 31.

Another recommendation was that gratuity should be made payable to all employees-- contract labourers, seasonal workers, piece-rate workers, daily/monthly wage workers.

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"The benefit of the pro-rata gratuity should be extended to the contract labour if they serve for the full period of the contract irrespective of the change of contractors. The principal employer should be liable to pay pro-rata gratuity for the term of the contract and it may be paid along with the last wages," the report noted.

The formula for calculation of gratuity payable to different
category of workers should be given in the code itself, instead of resorting to notifications at a later stage, the committee said.

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first published: Aug 5, 2020 04:28 pm