After modifying the existing gratuity laws, the High Court has rolled out a wave of relief to employees of all classes. It is genuinely a watershed moment not only for higher gratuity payments, particularly to the longer-serving employees in higher salary bands, but, in general, for employees.
What The This Ruling Means
The judgment relates in fact, to the formula for calculating gratuity and the eligibility conditions in respect of it, as defined under the Payment of Gratuity Act, 1972. There was before, a limit to gratuity to the private-sector employees up to ₹20 lakh while for some categories that limit was much lower than that. The recent ruling declared the ceiling to be outdated and ordered it to be revamped all in the context of inflation and salaries too high for the old ceiling to give any meaningful gratuity.
Some allowances earlier were excluded from basic pay, so most may consider it of paramount importance to include it in gratuity calculation. This judgment will substantially increase the amount that employees will otherwise be entitled to at the time of retirement or resignation or termination after five years of continuous service.
Extensive After Effects On Employees
This verdict is likely to affect thousands of employees in the government, public sector undertakings, and even in private companies. For elderly employees, especially those about to retire, the modified gratuity structure may translate into a payment of an extra ₹5-10 lakh or more, depending on their pay and length of service.
Besides, the judgement also stipulates retrospective applicability in certain cases to allow employees retired in the preceding years to lodge claims for computed amounts of gratuity.
Employees And Unions Reaction
The decision was immensely appreciated by employee unions and workers’ associations. In fact, many see it as overdue justice in labor rights, especially when salaries and the cost of living have escalated past a decade.
A spokesperson from a national body of labor union told, “This was not just a legal victory, it was a moral one. Decades of dedication to an organization can now be fairly compensated for by employees.”
What Next?
Employers will put their gratuity policies on a review and will begin to prepare themselves for mounting liabilities. Legal experts advise employees to look again at gratuity settlements they have made in the past and see if they need to visit HR or legal advisory services.