The Union Cabinet on Tuesday approved an amendment Bill that seeks to double the gratuity ceiling to ₹20 lakh from ₹10 lakh for employees in the private and public sector, as well as autonomous organisations, brining it on a par with Central government employees.

The Cabinet also gave its approval for introduction of the Payment of Gratuity (Amendment) Bill, 2017 in Parliament that seeks to amend the Payment of Gratuity Act, 1972, which applies to establishments employing 10 or more persons.

“The amendment will put the maximum limit of gratuity of employees of the private sector as well as public undertakings and autonomous organisations under the government who are not covered under Central Civil Services (Pension) Rules, at par with central government employees, which is ₹20 lakh,” an official release said. Before implementation of the 7th Central Pay Commission, the ceiling under Civil Services (Pension) Rules, 1972, was ₹10 lakh.

Considering inflation and wage increase even in the case of employees engaged in the private sector, the government is of the view that the entitlement of gratuity should be revised for employees who are covered under the Payment of Gratuity Act, 1972, which applies to establishments employing 10 or more persons, an official release said.

However, industry representatives did not sound too upbeat. Anshul Prakash, Partner, Khaitan & Co, said while the move was good from an employee’s perspective, the “industry would be impacted if this proposal becomes the law.”

“Earlier, employers could limit their liability to the statutory cap of ₹10 lakh even if the calculation of gratuity for an eligible employee resulted in a higher figure,” he added.

Additional 1% DA

The Cabinet also approved the release of additional 1 per cent dearness allowance and relief for about 50 lakh Central government employees and 61 lakh pensioners from 4 per cent to 5 per cent, applicable from July 1, 2017.

The combined impact on the exchequer on this account would be ₹3,068.26 crore a year and ₹2,045.50 crore in 2017-18 (for a period of eight months from July 2017 to February 2018) , said an official release.

The release of the additional instalment has been done to compensate for price rise and was in accordance with the accepted formula, based on the recommendations of the 7th Central Pay Commission, it added.

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