For pensioners who retired between January 1, 2020, and June 30, 2021, the gratuity and leave will be enchased.
The Central Government recently revised the percentage of Dearness Allowance (DA) to be considered for the calculation of Gratuity and Leave Encashment of Central Government employees. This is applicable for those who retired between January 1, 2020, and July 30, 2021. The government issued a memorandum in which it clarified with regards to this gratuity calculation for those pensioners. According to the office memorandum issued by the Department of Expenditure under the Ministry of Finance, the gratuity and leave of those employees who did retire during the aforementioned period would be encashed without applying the freeze DA for the same timeframe.
Essentially, what this means is that for pensioners who retired between January 1, 2020, and June 30, 2021, the gratuity and leave will be enchased while keeping the DA instalments announced for that period.
Clarifying further on this matter, the office memorandum said, “Keeping in view that gratuity and cash payment in lieu of leave are one-time retirement benefits admissible to employees on retirement and employees who retired during the period from 01.01.2020 to 30.06.2021 have been allowed lesser amount than what would have been calculable but for the aforesaid orders of this Ministry dated 23.04.2020 and 20.07.2021, the matter has been considered sympathetically with a view to allowing the same to such employees.”
With that said and considering the new set of orders, here is the general breakup of the DA going forward and what the benefits of the employees/pensioners will be.
1) For employees who retired between the period of January 1, 2020, to June 30, 2020, the applicable DA rate is 21 per cent. This consists of 17 per cent plus 4 per cent for the period January 1, 2020, to June 30, 2020.
2) For those employees who retired between the period of July 1, 2020, to December 31, 2020, the applicable DA rate is 24 per cent. This is broken down as 17 per cent plus 4 per cent for the period January 1, 2020, to June 30, 2020, and 4 per cent for July 1 to December 31, 2020.
3) For employees who had retired between the timeframe of January 1, 2021, to June 30, 2021, the applicable DA rate is 28 per cent. This is broken down into 17 per cent plus 4 per cent for the period January 1, 2020, to June 30, 2020, 4 per cent for July 1 to December 31, 2020, and 3 per cent for January 1 to June 30, 2021.
How Could Employees see Rs 7 Lakh in Retirement Funds?
HS Tiwari, who is the Former President of AG Office Brotherhood, Prayagraj, which calculates DA, was quoted in a Jagran report saying that if the basic salary of an employee is Rs 40,000 rupees at the time of retirement, then they would benefit from the 11 per cent increase in dearness allowance (DA). The amount of their gratuity and Leave Encashment will increase by about Rs 117,000. Now, if that same basic pay clocked in at say Rs 250,000 per month, then that retirement fund would significantly increase by more than Rs 7 lakh for that government employee, the report mentioned.
How Does This Apply to People Who Retired Between Jan 1, 2020, and June 30, 2021?
If your basic salary is around Rs 40,000 a month and the 11 per cent DA hike for the one and a half, year period came into play, that would bring the amount to around an additional Rs 4,400. Therefore the total basic salary and the DA hike would be Rs 44,000 per month. Now, if you add the benefits of gratuity and leave encashment then it would come up to around Rs 116,660 per month.
The Ministry of Finance said in the office memo, “As per the existing provisions contained in Central Civil Services (Pension) Rules 1972, DA on the date of retirement or death is reckoned as emoluments for the purpose of calculation of gratuity. Also, as per the existing provisions contained in CCS (Leave) Rules 1972, pay admissible on the date of retirement plus DA on that are reckoned for the purpose of calculation of cash payment in lieu of leave.”
It should be noted that as per the current guidelines, the gratuity payment is effective only after the completion of five years of service. This is expected to change under the new labour code. This means that an employee would be eligible for gratuity payments after they complete just 1 year of service.
However, the implementation of this significant change has been postponed till 1 October. It is expected to be delayed until the beginning of the next financial year. The guidelines and the accompanying processes for the same are expected to be revised with time.
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