The Employees' Provident Fund Organisation (EPFO) has announced a temporary suspension of the enhancement of gratuity on account of the increase in dearness allowance (DA) with immediate effect.

 

In a circular signed by SK Suman, Additional Central PF Commissioner, the EPFO stated, "The circular number HRD-1/8/2024/Misc-Circulars-Part(1)/1004 dated 30.4.2024 is kept in abeyance with immediate effect."

 

The circular, released on Tuesday, has raised questions regarding the implications of this move. According to Manmeet Kaur, Partner at Karanjawala & Co., the potential ramifications of the May 7 circular are twofold: "Once the earlier circular is reinstated, 1) The beneficiaries will be entitled to benefits from January 1 itself, or 2) from another/later date, if the effective date of January 1 is modified."

 

Recalling the Context The Union Cabinet had previously approved the release of an additional dearness allowance (DA) and dearness relief (DR) to central government employees and pensioners, effective January 1. The DA was increased from 46 percent to 50 percent of the basic pay or pension.

 

Consequently, all related allowances, such as house rent allowance (HRA), gratuity ceiling, and hostel subsidy, were set to rise as they are linked to the DA. Following the DA hike to 50 percent, the gratuity ceiling was raised from Rs20 lakh to Rs25 lakh.

 

The decision to increase the DA and DR was taken in the run-up to the general elections, aiming to alleviate the impact of inflation on government employees and pensioners. This move is expected to benefit nearly 4.9 million government employees and 6.79 million pensioners, costing the exchequer a total of around Rs12,868.72 crore.

 

The increase was in accordance with an accepted formula based on the recommendations of the Seventh Central Pay Commission, as stated by the government.

 

NPS-Related Matters In another development, the EPFO released a circular announcing a new email ID for matters related to the National Pension System (NPS). The new email ID, [email protected], was announced in a circular released on May 3, 2024.

 

The circular states that any references to NPS-related matters pertaining to the head office will now be forwarded to the said email ID. Additionally, the pension fund body highlighted that pending references sent earlier are required to be forwarded to the new email ID.

 

As the EPFO navigates these changes, clarity on the gratuity enhancement and streamlining of NPS-related matters will be crucial for ensuring the smooth functioning of the organization and addressing the concerns of its stakeholders.