New Delhi: The central government appears to be taking a serious stance on private employees. The central government has now decided to implement four new codes, including the new labour laws. The implementation of these new codes completely changes the gratuity system for millions of employees. Previously, five years of continuous service were required to receive gratuity.
Now, employees will be eligible for this benefit even after one year of service. The most significant change is regarding gratuity. This means that an employee can claim gratuity after 12 months of service. This government decision is a relief for employees who work for a short period on a project or contract.
Doubling the Tax-Free Limit
The central government has also increased the tax-free limit on gratuity. Previously, the tax-free limit was up to ₹10 lakh, but now it has been decided to increase it directly to ₹20 lakh. This means that gratuity up to ₹20 lakh will be completely tax-free. The entire gratuity amount will be credited to the employee’s account.
The company will be required to pay gratuity within 30 days. If the company delays paying the gratuity amount for any reason, it will have to pay 1 per cent interest per year. In many cases, compensation can also be doubled.
Overtime will also be doubled. One day of paid leave will be available for every 20 days of work. These benefits will certainly make life easier for employees. Expenses and procedures for companies are also set to increase.
Understand the calculation
For information, the formula for receiving gratuity after one year of service is the same: Gratuity = Last Basic Salary × (15/26) × Total Service (in years). This means that if an employee’s last basic salary is ₹50,000 and they have worked for only one year, they could receive up to ₹50,000 × (15/26) × 1 = ₹28,847. Additionally, gratuity benefits of up to ₹28,800 can now be earned for just one year of service. This will also be beneficial for employees.