new rule of gratuity
When the government announced the new labor codes, lakhs of private sector employees felt that there would be a major improvement in workplace benefits. The most discussed issue was that employees working on fixed term basis will be able to get gratuity only after one year of service. But in reality even today most of the employees are not getting this benefit. The question is that even after changing the rules, why is gratuity not being received in one year?
What was the rule of gratuity earlier?
Till now, to get gratuity in India, it was necessary for any employee to work in the same company for five consecutive years. This rule was fine for those with permanent jobs, but it proved to be almost impossible for those working on fixed term and contracts. Many employees change jobs or their contracts expire before the completion of five years.
What changed in the new labor codes?
In the new labor codes, the government made it clear that if a fixed term employee completes one year’s service, then he should get gratuity according to that one year. The government believed that in today’s job market, people do not stay in the same company for a long time, hence social security should be provided early.
Then why was the new rule not implemented?
The real problem starts from here, labor laws in India come in the concurrent list. This means that the central government can make laws, but it is the responsibility of the state governments to implement them. Unless state governments notify their labor rules, there is no legal compulsion on companies to implement new laws.
Why are companies following old rules?
Due to lack of clear rules from the state governments, most of the companies are still working under the old gratuity law. Companies fear that if they implement the new rules at their level, they may face legal problems in the future like audit, investigation or payment from back date. Therefore, choosing the safe route, they are sticking to the five-year rule.
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What does the government say?
The Labor Ministry has made it clear many times that under the new codes, a fixed term employee should get gratuity after completing one year. But the ministry itself also believes that until the states finalize their rules, this provision will remain limited to paper only.
Not only gratuity, other benefits also stuck
Along with gratuity, many other major changes related to the new labor codes are also on hold. Changes in salary structure, social security for gig workers, rules related to working hours, overtime and layoff are also awaiting approval from the states. Unless these rules are implemented, employees will not get their benefits.