Government employees recruited after January 2004 would also be entitled to receive gratuity on retirement or death while in service, the Modi government decided on Friday.
The Centre and many state governments switched to the new pension scheme from January 1, 2004, that required employees to contribute 10% of their monthly salary towards their pension with a matching contribution from the government. Some states, except West Bengal and Tripura, joined later.
More than 300,000 central government employees recruited after 2004 are covered by the NPS. The Seventh Pay Commission had lamented that many of them might not have enough money in their pension fund at retirement due to the government’s inability to firm up the rules of the game on time.
Employees covered by the National Pension Scheme (NPS) were not entitled to any additional benefits other than the government’s contribution to their pension fund. But it had been argued that this was unfair since the NPS only replaced the pension, not other benefits.
Gratuity is calculated as a proportion of the last salary drawn and takes into account the number of years put in by the employee. The upper limit for the gratuity was recently raised from Rs 10 lakh to Rs 20 lakh, in line with the recommendation of the Seventh Pay Commission.
The government had provisionally relaxed the no-gratuity rule for new recruits in 2009 to help family of young employees had died. On Friday, the department of pensions announced this would be a permanent feature.
“It has been decided that the government employees covered by National Pension System shall be eligible for benefit of retirement gratuity and death gratuity on the same terms and conditions as applicable to (other) employees,” said the pension department order. It will come into force from 2004.