UPS Rule: Now these government employees will not get a gratuity of Rs 25 lakh; will you benefit?

Big news for central government employees. Last year, the Department of Pension and Pensioners Welfare (DoPPW) increased the maximum gratuity limit for central government employees by 25% to Rs 25 lakh. This adjustment took effect on January 1, 2024, coinciding with the dearness allowance (DA) reaching 50%. However, not all government employees will receive the full amount.

How is gratuity determined?

Gratuity is calculated using a specific formula. According to the guidelines, an employee is entitled to receive either 16.5 times their last salary (which includes basic pay and dearness allowance) or Rs 25 lakh, whichever is lower. This means that not every employee will receive Rs 25 lakh; the gratuity amount will depend on their length of service and salary.

Types of Gratuity

Government employees are eligible for two types of gratuity: retirement gratuity and death gratuity.

Retirement Gratuity

For every six months of service, one-fourth of the basic pay plus dearness allowance is added. The maximum gratuity payable is either 16.5 times the salary or Rs 25 lakh, whichever is lower. A minimum of five years of service is required to qualify for gratuity.

Death Gratuity

In the event of an employee’s death while in service, their family will receive gratuity based on the following formula:

Service Duration and Pay Structure:

– Less than 1 year: 2 times the salary

– 1 to 5 years: 6 times the salary

– 5 to 11 years: 12 times the salary

– 11 to 20 years: 20 times the salary

– Over 20 years: Half pay for every 6 months

Will gratuity be provided under the Unified Pension Scheme (UPS)?

The central government plans to introduce a new pension initiative, the ‘Unified Pension Scheme (UPS)’, starting April 1, 2025. This scheme merges elements from both the Old Pension Scheme (OPS) and the National Pension System (NPS). Employees with a minimum of 10 years of service will be assured a minimum pension of Rs 10,000, and those who complete their full service term will receive a guaranteed fixed pension.

Recently, a question was raised in Parliament regarding the availability of gratuity under the Unified Pension Scheme (UPS), similar to what is offered under the Old Pension Scheme (OPS) and the New Pension Scheme (NPS). The Finance Ministry responded that the UPS operates as an option within the NPS, stating that “gratuity will be disbursed according to the Central Civil Services (Payment of Gratuity under National Pension System) Rules, 2021.”