8th Pay Commission: Employee unions propose new gratuity formulas, payments up to ₹50–75 lakh

At least two organisations have called for raising the maximum gratuity limit. They have also suggested new formulas to calculate higher gratuity payouts. This article highlights some of the key gratuity proposals that, if accepted, could benefit employees upon retirement.

Retirement gratuity proposal by IRTSA

The Indian Railways Technical Supervisors’ Association (IRTSA) has proposed raising the maximum gratuity ceiling to ₹50 lakh. They have also suggested calculating gratuity as follows:

Gratuity = (1/3) × (Basic Pay + DA) × (Number of completed six-monthly periods of qualifying service)

"Retirement gratuity should be calculated @ 1/3rd of a month’s BP + DA drawn on the date of retirement for each completed six monthly 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 said.

Death Gratuity proposal by IRSTA

IRSTA said death gratuity up to ₹50 lakh should be calculated based on the number of service years 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 of 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

Gratuity proposal by RSCWS

The Railway Senior Citizens Welfare Society (RSCWS) has proposed a periodic review of the gratuity ceiling and immediate payout on retirement.

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

"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 rationalized to maintain parity and fairness," they added.

Gratuity proposal by NC-JCM Staff Side

The Staff Side of NC-JCM has proposed raising the gratuity limit to ₹75 lakh and calculating the payout based on 25 effective working days instead of 30 days in a month

"We propose that Gratuity should be calculated on the basis of 25 effective working days instead of 30 days in a month, so that Government Employees are not placed at a disadvantage position 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."

The Staff Side also proposed a new formula for gratuity calculation. "We further propose that the 8th CPC may recommend to calculate Gratuity at half a month Basic Pay + DA for each completed 6 months period of qualifying service. Considering rising salaries and inflation the maximum gratuity ceiling should be enhanced from Rupees 25 Lakhs to 75 Lakhs," they said.

What are the current gratuity rules

Currently, retirement-cum-death gratuity is calculated at 1/4 of the Basic Pay + DA for each completed 6-month period of qualifying service, subject to a maximum of 16.5 times the emoluments. There is also a monetary ceiling of ₹ 25 lakh.

Gratuity benefit is provided to government employees who retired after completing 5 years of qualifying service. If a government employee dies while in service, then his/her family receives gratuity at prescribed rates.