Home Business Gratuity after one year service for contractual workers? details here

Gratuity after one year service for contractual workers? details here

Contract workers will get gratuity after one year of employment

new labor lawsWhich is yet to be achieved by all states, will significantly change take-home pay, provident fund contribution and working hours for employees in the private sector.

The proposed changes in the new labor code will also increase the amount of retirement fund and gratuity of the employee.

four new labor code It has been constituted by reviewing and combining 29 central labor laws.

As per the Payment of Gratuity Act 1972, an employee in a private company having more than 10 employees is eligible to claim gratuity benefit after five years of continuous service.

Under the soon-to-implement labor codes, the Center plans to reduce the gratuity eligibility limit for fixed term or contract employees to only one year of service.

But for those on the regular payroll of a company, the gratuity norms remain the same.

Under the new Social Security and Industrial Relations Code, the government has proposed to ease the five-year service rule for payment of gratuity for fixed-term employees.

Fixed-term employees are those whose employment ends with the expiration of the contract.

The government aims to broaden social security for private sector employees by giving them the benefit of gratuity to contract workers, who will mostly include low-ranking workers such as labourers, factory operators, helpers and drivers.

The Code also mandates that gratuity be calculated on the basis of pay defined in the new guidelines.

However, regular employees will be eligible for gratuity after five years of continuous service in a company.

As per the existing law, gratuity is calculated on the basis of basic pay and dearness allowance. For each year of service, 15 days basic pay and dearness allowance as per last drawn pay is paid as gratuity.

A month is considered as 26 days for calculation of gratuity. The maximum limit of gratuity amount is Rs 20 lakh.

The new labor code also mandates that 50 percent of the gross pay should be given as basic pay. This will increase the amount of gratuity for the employees.

If the basic salary of the employee is less than 50 percent of the gross amount then the employer is required to restructure the remuneration.

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