Gratuity Ceiling at ₹20 Lakh Mandatory for CPSE Employees, DPE Issues Consolidated Guidelines

Gratuity Ceiling at ₹20 Lakh Mandatory for CPSE Employees, DPE Issues Consolidated Guidelines

Department of Public Enterprises (DPE), under the Ministry of Finance, has issued consolidated guidelines on the payment of gratuity to employees of Central Public Sector Enterprises (CPSEs), bringing clarity on the applicable ceiling and statutory obligations. The Office Memorandum was issued on December 9, 2025, consolidating earlier instructions and subsequent clarifications.

According to the guidelines, the amendment to the Payment of Gratuity Act, 1972 through the Payment of Gratuity (Amendment) Act, 2018 replaced the fixed gratuity ceiling of ₹10 lakh with a provision allowing the Central Government to notify the limit from time to time.

Following this amendment, the Ministry of Labour and Employment notified ₹20 lakh as the maximum gratuity payable, with effect from March 29, 2018.

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The DPE clarified that for the period from January 1, 2017 to March 28, 2018, payment of gratuity up to ₹20 lakh to executives and non-unionised supervisors of CPSEs on the IDA pay pattern was subject to the affordability of the concerned CPSE, where pay revision was implemented from January 1, 2017.

However, from March 29, 2018 onwards, payment of gratuity up to ₹20 lakh has become mandatory for all CPSEs, irrespective of their financial condition, as it is now a statutory requirement under the amended law.

The Office Memorandum also makes it clear that the Government’s decision to raise the gratuity ceiling from ₹10 lakh to ₹20 lakh based on the recommendations of the 7th Central Pay Commission, with effect from January 1, 2016, does not apply to CPSE employees. CPSE gratuity entitlement is governed strictly by the provisions of the Payment of Gratuity Act and the notifications issued thereunder.

All administrative ministries and departments have been asked to ensure compliance with these consolidated guidelines and to circulate the instructions to CPSEs under their administrative control.

DPE said the move is intended to remove ambiguity, ensure uniform implementation of the law, and safeguard statutory gratuity benefits for employees of Central Public Sector Enterprises.