Gratuity is a payment calculated using the defined calculation criteria under the Payment of Gratuity Act 1972 and paid from the employer to the employee to show his gratitude for the long and sincere service of the employee. Recently the Karnataka Government has followed the path of Andhra Pradesh and notified the Karnataka Compulsory Gratuity Insurance Rules, 2024 mandating the requirement of compulsory insurance by employers to cover their gratuity liability and ensure that the employees get the gratuity even when employers bankrupt due to financial issues. The rules have come into effect from the date of publication of rules in the official gazette i.e. 10.01.2024. Though it is a very good step considering the interest of employees, it has huge implications for the employers in terms of both financial burden and compliance requirements including registration of the establishment. It challenges the spirit of ease of doing business in Karnataka. Nevertheless, let us examine the implications for employers considering the new rules.
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