8th Pay Commission: ₹75L gratuity ceiling, enhanced death benefits — what changes are being sought in gratuity rules?

Ahead of the 8th Pay Commission, several employee bodies and pensioners' associations have sought sweeping changes to gratuity rules, including a higher ceiling, revised calculation methods and enhanced death benefits. Here's a look at some key gratuity proposals from different union bodies, how they differ from the current rule, and how they can benefit pensioners.

What are the current gratuity rules

A gratuity benefit is provided to government employees who retire after completing 5 years of qualifying service. In case a government employee dies while in service, the family is entitled to receive gratuity at prescribed rates:

• Retirement-cum-death gratuity = 1/4 of Basic Pay + Dearness Allowance (DA) for each completed 6-month period of qualifying service.
• The gratuity amount is subject to a maximum limit of 16.5 times the employee's emoluments (Basic Pay + DA).
• Also, there is a monetary ceiling of ₹ 25 lakh.

Here is what has been proposed:

Indian Railways Technical Supervisors’ Association (IRTSA) proposal

• Raising the maximum gratuity ceiling to ₹50 lakh,
• Calculation as follow: Gratuity = (1/3) × (Basic Pay + DA) × (Number of completed six-monthly periods of qualifying service)

IRSTA said in its memorandum, "Retirement gratuity should be calculated @ 1/3rd of a month’s BP + DA drawn on the date of retirement for each completed six-month period of qualifying service. The retirement gratuity payable for qualifying service of 33 years or more should be 32 times of BP + DA, subject to a maximum of ₹50 lakhs."

IRSTA Death Gratuity proposal

IRSTA said the amount of death gratuity payable—capped at ₹50 lakh—should depend on the employee's total years of qualifying service, as follows:

• Less than one year: 4 times the basic pay
• One year or more but less than 5 years: 12 times the basic pay
• 5 years or more but less than 11 years: 24 times the basic pay
• 11 years or more but less than 20 years: 30 times the basic pay
• 20 years or more: Half of emoluments for every completed 6-month period of qualifying service, subject to a maximum of 50 times emoluments

Railway Senior Citizens Welfare Society (RSCWS) gratuity proposal

The Railway Senior Citizens Welfare Society (RSCWS) has called for regular revisions to the gratuity ceiling.

"The ceiling of gratuity should be reviewed periodically in line with the rising cost of living. The payment of gratuity must be ensured promptly at the time of retirement without procedural delays," the RSCWS said in its memorandum

"In addition, the gratuity provisions under different pension systems such as the Old Pension Scheme (OPS), New Pension Scheme (NPS), and Unified Pension Scheme (UPS) should be rationalised to maintain parity and fairness," they added.

NC-JCM Staff Side Gratuity proposal

Among its key demands, the Staff Side of NC-JCM has called for raising the gratuity cap to ₹75 lakh and changing the calculation formula based on 25 effective working days instead of 30 days in a month.

"We propose that Gratuity should be calculated based on 25 effective working days instead of 30 days in a month, so that Government Employees are not placed at a disadvantage compared to employees covered under the Payment of Gratuity Act," the Staff Side said.

"Further, the existing ceiling of 16.5 times the emoluments should be removed. This effectively reduces Gratuity for employees who have served beyond 33 years."