The Labour Ministry has made it clear that enhanced limit of gratuity for private sector workers will be effective from prospective date only. It means provision regarding enhanced limit will be effective for workers becoming eligible on or after March 29, 2018.

In a brief posted on its website, the Ministry said, “The enhancement in gratuity ceiling under the Payment of Gratuity Act, 1972 has been implemented from prospective date only. Further, implementation of the same with retrospective effect will be administratively difficult and employers may not have sufficient liquidity to meet the arrear liabilities.” Amendment in the Payment of Gratuity Act was notified on March 29. This amendment has enhanced the gratuity ceiling to Rs 20 lakhs from Rs 10 lakhs.

The Labour Ministry said that it received a large number of representations requesting that the effective date of Payment of Gratuity (Amendment) Act 2018 should be January 1, 2016 instead of March 29, 2018 at par with the Central Government. However, the Ministry did not find this proposal practical. This stand will disappoint the employees.

Earlier upper ceiling on gratuity amount under the Act was Rs 10 lakh. The provisions for Central Government employees under Central Civil Services (Pension) Rules, 1972 with regard to gratuity were also similar. Before implementation of 7th Central Pay Commission, the ceiling under CCS (Pension) Rules, 1972 was Rs 10 lakh. However, with implementation of 7th Central Pay Commission, in case of Government servants, the ceiling now is Rs 20 lakhs effective from January 1, 2016. Therefore, considering the inflation and wage increase even in case of employees engaged in private sector, the Government enhanced the limit for the private sector.

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