The Act applies to factories, mines, oil fields, plantations, ports, railways, motor transport undertakings, companies, and shops, as well as other establishments, provided they employ ten (10) or more workmen. As per Section 4 of the Act, gratuity shall be payable to an employee upon the termination of their employment, provided they have rendered continuous service for a period not less than five (5) years, in the following circumstances: (a) Upon superannuation; (b) Upon retirement or resignation; and (c) Upon death or disablement due to accident or disease.
However, the global trend towards gratuity is more flexible and therefore, there is an ongoing debate and consideration in India about reducing the eligibility period for receiving gratuity. The Standing Committee on Labour (2019-20) received suggestions to reduce the eligibility period for gratuity. Unlike India, countries such as the United Arab Emirates (UAE) prescribe a minimum service period of one year as per Article 51 of the new UAE labour law. A similar approach is followed in other Gulf Cooperation Countries (GCC), for instance, Saudi Arabia, Oman, and Bahrain, where the minimum service period for gratuity is one year. There are also alarming reports of a trend in which many Indian companies terminate their employees just before they become eligible for gratuity. Also, India calculates gratuity based on 15 days of wages for each completed year of service, while other GCC countries like the UAE base it on the employee’s basic salary, with 21 days’ basic salary per year for the first five years and 30 days’ basic salary for each subsequent year. With these global developments and laws, time and again, there is a need felt to align India’s gratuity regulations more closely with international standards and provide employees with earlier access to this important employee benefit.
Source: Barandbench
