7th Pay Commission: Government employees gratuity limit bill passed; amount jumps from Rs 10 lakh to Rs 20 lakh

7th Pay Commission: The Lok Sabha today passed a bill that seeks to increase government employees maximum limit of gratuity in the private and public sector from the present Rs 10 lakh to Rs 20 lakh. Notably, this hike applies to private sector employees too. Before implementation of 7th Pay Commission, the ceiling under CCS (Pension) Rules, 1972 was Rs 10 lakh but it was doubled to Rs 20 lakh from January 1, 2016. The bill seeks to increase the maximum limit of gratuity of employees in the private sector and in public sector undertakings and autonomous organisations under the government, who are not covered under Central Civil Service (Pension) Rules, at par with the central government employees. The present upper cap on gratuity is Rs 10 lakh.  

The bill empowers the Central Government to notify the proposed ceiling so that the limit can be revised from time to time keeping in view the increase in wage and inflation, and future Pay Commissions without having to amend the Act, by substituting the words "ten lakh rupees" in Section 4 with the words "such amount as may be notified by the Central Government from time to time".  

The Payment of Gratuity Act, 1972 was enacted to provide for a scheme for the payment of gratuity to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, shops or other establishments who have rendered a minimum five years of continuous service with an establishment employing ten or more persons. 

The bill's statement of objects and reasons states that the government is of the view that the gratuity should also be revised for employees who are covered under the existing act considering inflation and wage increase.

While this will be welcome news, what government employees really want is for Centre to hike minimum wages as per 7th Pay Commission report except that fitment factor should be 3.68 times to make it Rs 26,000.