The Center's decision to increase its employees' dearness allowance by 4% to 50% has resulted in a substantial revision in other allowances, including retirement gratuity, which is a huge boon for government employees.
Retirement gratuity and death gratuity
The maximum limit for Retirement Gratuity and Death Gratuity is increased by 25%, from Rs 20 lakh to Rs 25 lakh, effective January 1, 2024.
According to the Office Memorandum (OM) dated May 30, 2024, “Accordingly, as per the Government's decisions in implementation_ of the recommendations of the Seventh CPC, the maximum limit of Retirement Gratuity and Death Gratuity under the Central Civil Services (Pension) Rules, 2021 or the Central Civil Services (Payment of Gratuity under National Pension System) Rules, 2021, would be increased by 25% i.e. from Rs 20.00 Lakh to Rs 25.00 Lakh, with effect from I s' January 2024.”
Previously, the same announcement, which was initially been made on April 30, 2024, but was put on hold on May 7 with the following statement: "The circular number HRD-1/8/2024/Misc-Circulars-Part(1)/1004 dated 30.4.2024 is kept in abeyance with immediate effect.".
Initial order
According to the Office Order dated Ministry of Labour and Employment, Govt of India dated April 30, 2024, “As per para 6.2 of the OM no. 38/3712016-P&PW(A)(1) dated 04.08.2016 issued by Department of Pension and Pensioners' Welfare, Ministry of Personnel, Public Grievances and Pensions, Government of India, the maximum limit of Retirement gratuity and death gratuity shall be increased by 25% whenever the dearness allowance rises by 50% of the basic pay. Accordingly, the maximum limit of Retirement gratuity and death gratuity shall be increased by 25% to Rs. 25 Lakh from existing Rs 20 Lakh on account of revision of Dearness Allowance payable to Central Government Employees to 50% of the basic pay w.e.f 1.01.2024, subject to other conditions mentioned in the DoP&PWOM dated 04.08.2016.”
DA hiked to 50%
The Central government increased the dearness allowance (DA) and dearness relief (DR) by 4% in March 2024. This was a major relief for millions of central government employees and pensioners. Due to this hike in DA to 50%, various components of a central government employee’s salary also increased.
What is gratuity?
Gratuity is a defined benefit plan given by the employer to the employee for rendering services continuously for five years or more.
According to the Payment of Gratuity Act, 1972, an employee can receive gratuity if he has rendered continuous service for at least five years with an organisation. This gratuity is payable to the employee:
a) On his superannuation, or
b) On his retirement or resignation
However, there is an exception where the condition of working continuously for five years with an organisation is not applicable.
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