Payment of Gratuity Act – Amendments 2010

Payment of Gratuity Act – Amendments 2010


The Cabinet on Thursday approved an amendment to the Gratuity Act to raise the ceiling from Rs 3.5 lakh to Rs 10 lakh. The Bill to amend the Act will now go to Parliament


Every salaried person, who has completed five years of government or private sector service, is eligible for half a month’s salary as gratuity for every completed year of service. But the gratuity pay of those with higher salaries is now limited at Rs 3.5 lakh.

The proposed amendment raises this to Rs 10 lakh. Every employer with more than ten salaried workers is mandated to provide gratuity to the eligible employees. Many companies, however, do not keep the gratuity liability adequately funded. That is, they make provisions for future payment, but do not set aside funds towards the future payment. Listed companies are expected to disclose their gratuity liability.