DA hike news: EPFO puts 25% increase in gratuity due to dearness allowance raise on hold

7th Pay Commission DA Hike: The Employees’ Provident Fund Organisation (EPFO) has made a significant decision concerning retirement and death gratuity for government employees. It has put on hold the increase in retirement and death benefits resulting from a hike in Dearness Allowance to 50%.
According to an ET report, EPFO had on April 30, 2024, announced a 25% increase in the maximum retirement benefit and death benefit, raising it from Rs 20 lakh to Rs 25 lakh.However, just a week later, on May 7, they released a circular putting the gratuity hike on hold. The order did not provide a rationale for the decision.
According to a circular from the Ministry of Labour & Employment dated May 7, 2024, the earlier order regarding the gratuity increase has been kept in abeyance with immediate effect.
As per the Ministry of Labour and Employment order dated April 30, 2024, quoted by ET, the maximum retirement and death gratuity should increase by 25% whenever the dearness allowance (DA) rises by 50% of the basic pay. Thus, with the DA reaching 50% as of January 1, 2024, the gratuity limits were to increase from Rs 20 lakh to Rs 25 lakh, following the conditions set by the Department of Pension and Pensioners’ Welfare in their 2016 order.

DA and DR by 4% in March 2024

The Central government increased the dearness allowance and dearness relief by 4% in March 2024. This hike, raising the DA to 50%, provided significant relief for millions of central government employees and pensioners and led to increases in various components of their salaries.
Allowances increased:
Following the dearness allowance hike to 50% earlier this year, certain allowances, such as the Children’s Education Allowance (CEA) and the Hostel Subsidy, automatically increased by up to 25% for employees and retirees.
According to an OM released by the Ministry of Personnel, Public Grievances and Pension on April 25, 2024, the Children’s Education Allowance (CEA) and Hostel Subsidy limits automatically increase by 25% whenever the dearness allowance (DA) rises by 50%. This adjustment follows the enhancement of DA to 50% effective January 1, 2024, as announced by the Ministry of Finance on March 12, 2024.
What is gratuity?
Gratuity is a benefit plan provided by the employer to the employee for continuous service of five years or more.
According to the Payment of Gratuity Act, 1972, an employee is eligible for gratuity if they have worked continuously for at least five years with an organisation. Gratuity is payable:
a) On superannuation
b) On retirement or resignation
There is an exception where the five-year continuous service condition does not apply.