PAYMENT OF GRATUITY (AMENDMENT) ACT, 2018

PAYMENT OF GRATUITY (AMENDMENT) ACT, 2018

Preamble - PAYMENT OF GRATUITY (AMENDMENT) ACT, 2018

THE PAYMENT OF GRATUITY (AMENDMENT) ACT, 2018

[Act No. 12 of 2018]

[28th March, 2018]

PREAMBLE

An Act further to amend the Payment of Gratuity Act, 1972.

Be it enacted by Parliament in the Sixty-ninth Year of the Republic of India as follows:--

Section 1 - Short title and commencement

(1)     This Act may be called the Payment of Gratuity (Amendment) Act, 2018.

(2)     It shall come into force on such date[1] as the Central Government may, by notification in the Official Gazette, appoint.

Section 2 - Amendment of section 2

In the Payment of Gratuity Act, 1972 (39 of 1972) (hereinafter referred to as the principal Act), in section 2, for clause (k), the following clause shall be substituted, namely:--

'(k) "notification" means a notification published in the Official Gazette and the expression "notified" shall be construed accordingly;'.

Section 3 - Amendment of section 2A

In section 2A of the principal Act, in sub-section (2), in the Explanation, in clause (iv), for the words "twelve weeks", the words "such period as may be notified by the Central Government from time to time" shall be substituted.

Section 4 - Amendment of section 4

In section 4 of the principal Act, in sub-section (3), for the words "ten lakh rupees", the words "such amount as may be notified by the Central Government from time to time" shall be substituted.

Statement of Objects and Reasons - Payment of Gratuity (Amendment) Bill, 2018

STATEMENT OF OBJECTS AND REASONS

1.        The Payment of Gratuity Act, 1972 (the Act) 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 the establishment employing ten or more persons. The calculation of gratuity amount is based on a formula, which is fifteen days of wages for each year of completed service, subject to a ceiling. The present ceiling, as provided under section 4 of the Act is rupees ten lakhs which was fixed in the year 2010.

2.        The period of twelve weeks of maximum maternity leave presently provided in section 2A of the Act for the purpose of calculating continuous service under the Act is on the basis of period of maximum maternity leave as provided in the Maternity Benefit Act, 1961. The maximum maternity leave under the Maternity Benefit Act, 1961 has been enhanced from twelve weeks to twenty-six weeks by the Maternity Benefit (Amendment) Act, 2017. It is therefore proposed to empower the Central Government to enhance the period of existing twelve weeks to such period as may be notified by it.

3.        The provisions contained in the Central Civil Services (Pension) Rules, 1972 for Central Government employees with regard to gratuity are similar to the provisions contained in the Act. After implementation of the 7th Central Pay Commission, the ceiling of gratuity for Central Government employees has been enhanced from rupees ten lakhs to rupees twenty lakhs. In the past, the ceiling amount of gratuity under the Act has followed the Central Pay Commission recommendations. Therefore, considering the inflation and wage increase even in case of employees engaged in private and public sector, the entitlement of gratuity is also required to be revised for employees who are covered under the Act. It has also been proposed to empower the Central Government to notify the ceiling proposed, instead of amending the said Act, so that the limit can be revised from time to time keeping in view the increase in wage and inflation, and future Pay Commissions.

4.        The Payment of Gratuity (Amendment) Bill, 2017, inter alia, proposes to amend-

(a)      section 2A of the Act so as to empower the Central Government to notify the period of maternity leave in case of female employee as deemed to be in continuous service in place of existing twelve weeks;

(b)      section 4 of the Act to substitute the words "ten lakh rupees" with the words "such amount as may be notified by the Central Government from time to time".

5.        The Bill seeks to achieve the above objects.