7th Pay Commission: Setback For Govt Employees; 25% Increase In Gratuity Due To Da Hike Kept On Hold By EPFO

New Delhi: Retirement fund body Employees’ Provident Fund Organisation (EPFO) has announced to keep in hold its previous circular on the hike on retirement gratuity and death gratuity by 25 percent consequent to the hike in Dearness Allowance (DA), that is expected to give a huge setback to government employees.

The EPFO has in its latest circular dated 7 May 2024 said that it has decided to keep in “abeyance” the hike in retirement and death gratuity for employees.

“The circular number HRD-1/8/2024/Misc-Circulars-Part(1)/1004 dated 30.4.2024 is kept in abeyance with immediate effect,” said the circular.

Earlier, an office order from the Ministry of Labour and Employment, Govt of India, issued on April 30, 2024 had said, “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 the existing Rs 20 lakh on account of the revision of dearness allowance payable to central government employees to 50% of the basic pay, it said.

Rules say, when the DA hits a 50 percent ceiling, gratuity limit and other allowances are automatically revised. With the last DA hike, it was expected that the rules and formula of automatic revision of gratuity will kick in, however, with the latest EPFO circular, it is apparent that the government has no proposal in its kitty at the moment.

DA Hiked To 50 Percent In March 2024

The Union Cabinet on March 7 approved to release an additional instalment of Dearness Allowance (DA) to Central Government employees and Dearness Relief (DR) to pensioners w.e.f. 1.1.2024 representing an increase of 4% over the existing rate of 46% of the Basic Pay/Pension, to compensate against price rise. With the increase in DA, transport allowance, canteen allowance, and deputation allowance among others were also increased by 25 percent

The combined impact on the exchequer on account of both Dearness Allowance and Dearness Relief would be Rs.12,868.72 crore per annum.  This will benefit about 49.18 lakh Central Government employees and 67.95 lakh pensioners, said an official release.

This increase is in accordance with the accepted formula, which is based on the recommendations of the 7th Central Pay Commission, said Ministry of Finance in its release.