Nearly three fold raise in gratuity ceiling-will it augur well or bode ill?

The literal meaning of gratuity is: something voluntarily given in return for favour or service, as a recompense or acknowledgment. It is paid in addition to salary, bonus, commission etc; when the employee leaves the service of employer. It is lump sum payment made based on the service of an employee either on retirement or death. It shows gratefulness and appreciation on the part of employer rewarding employee for hard work and also ensuring excellent service in future. Way back in 1968 the Supreme Court in Delhi Cloth and General Mills Company Ltd. said that the object of providing a gratuity scheme is to provide a retiring benefit to the workmen whop have rendered long and unblemished service to the employer and thereby contributed to the prosperity of the employer.

In industrial jurisprudence, however, it has been described as deferred wages. Before the enactment of Payment of Gratuity Act, 1972, its payment was very vague and uncertain. It has now to be compulsorily given. Like all other labour laws, it is also a social-welfare piece of legislation. The government has now decided to enhance the ceiling of gratuity for private sector employees from Rs.3.5 lakh to Rs. 10 lakh. The government has taken this decision with view to bringing parity with public sector employees, where the limit was already enhanced courtesy Sixth Pay Commission.

While this decision has brought cheers among many employees, it is bound to bring host of problems. The government says that in view of the erosion in the value of rupee, this increase is fully justified. Some say that it will slow down the attrition rate of employees but others hold the contrary opinion that it will further accelerate the problem. As on date Gratuity is payable on the completion of five years of continuous service. The service of five years shall not be necessary where the termination of the employment of any employee is due to death and disablement.

Of late, it is seen that young employees have developed the tendency of job hopping for better pastures. This is more in the field of Information Technology sector, which is expanding with break-neck speed. In other fields also the demand for deserving candidates has increased manifold. That is why; the enhancement of gratuity ceiling will hardly be any inducement for retaining the talented youngsters in one employment for five years. The concept of loyalty to any organisation has actually become the thing of the past. But then the other opinion is that almost threefold increase will work as glue for not so qualified employees and they will prove to be albatross in the neck of employers in order to avail the hefty amount of gratuity.

All said and done, the government seems to be completely oblivious of the trend sweeping across the world of leaving the matter of employment to employees and employers on themselves; and they should be allowed to go by the mutual agreement in this regard. This will keep the government and other players like; employees and employers free from unnecessary disputes and litigation. But will it think in that direction?