The Government of Karnataka has enacted a landmark legislation that significantly benefits employees across the state. The Karnataka Compulsory Gratuity Insurance Rules, 2024, introduce a mandatory insurance requirement for employers to secure their gratuity obligations. Let’s break down what this means for employers, employees, and insurance brokers within the state.
What’s on this page?
Understanding Gratuity
Gratuity is a lump sum benefit paid by an employer to an employee upon leaving the company after at least five years of continuous service. It’s a crucial component of retirement benefits, offering financial security during an employee’s later years.
Key Highlights:
Mandatory Gratuity Insurance:
The rules mandate every new employer to obtain a valid insurance policy within 30 days of the rules becoming applicable to their establishment.
Existing employers must secure insurance within sixty days from the commencement of these rules.
Insurance Providers:
Employers have the option to obtain insurance from the Life Insurance Corporation of India or any other insurance company compliant with relevant laws. The rules specify adherence to the Insurance Act of 1938, the Companies Act of 2013, and the Insurance Regulatory and Development Authority Act of 1999.
Premium Payments and Renewals:
Employers with valid insurance policies must ensure timely premium payments and renewals.
Strict adherence to due diligence for on-time payments is emphasized to avoid lapses.
Recovery of Gratuity Amount:
The Controlling Authority is authorized to recover gratuity amounts from the insurance company in case of disputes or as determined by the employer.
Registration of Establishments:
Employers must register their establishments with the Controlling Authority within 30 days of obtaining insurance, submitting employee details.
Continuation of Approved Gratuity Fund:
Employers with existing approved gratuity funds may continue or adopt the arrangement by submitting an application. This option is extended to employers with five hundred or more employees.
Incorporation of Gratuity Trust:
Employers with approved gratuity funds must register the gratuity trust with specified representatives.
Detailed procedures, compliance with accounting standards, and joint responsibilities of employers and insurance companies are outlined.
Compliance with Act:
Employers are obligated to take all measures to fulfill their obligations under the provisions of the Payment of Gratuity Act, 1972.
Conclusion:
The Karnataka Compulsory Gratuity Insurance Rules, 2024, represent a progressive move towards ensuring financial security for employees and providing a clear framework for employers. As an insurance broker, understanding and communicating these rules will empower you to guide employers in navigating this new regulatory landscape and, in turn, contribute to the well-being of the workforce.
Frequently Asked Questions
Do I need to get gratuity insurance if I have fewer than 10 employees?
No, the Karnataka Compulsory Gratuity Insurance Rules, 2024, only apply to establishments with 10 or more employees.
Who pays for the gratuity insurance premium?
The employer is solely responsible for paying the gratuity insurance premium.
Can I choose any insurance company for my gratuity insurance?
No, you must obtain the insurance policy either from the Life Insurance Corporation of India (LIC) or another insurance company authorised under the Insurance Act, 1938.
What happens if I fail to obtain gratuity insurance or renew the policy on time?
The employer might face penalties or legal action for non-compliance. Additionally, employees could face delays or difficulties in receiving their gratuity dues.
How can an insurance broker help me with gratuity insurance?
Insurance brokers can help you understand the rules, compare different insurance plans, negotiate for better rates, and ensure timely policy renewals to maintain compliance.
