7th Pay Commission: Rules For Calculating Gratuity & Leave Encashment For Central Govt. Employees

The Department of Expenditure has issued certain rules for the calculation of Gratuity and Leave Encashment for Central Govt. employees, who retired during the period from January 2020 to June 2021. According to the regulations of the Central Civil Services (Pension) Rules 1972, DA is counted as payment for the purpose of calculating gratuity on the date of retirement or death. In addition, pay admissible on the date of retirement and DA on that date are considered for the purpose of calculating cash payment in lieu of leave under the CCS (Leave) Rules 1972.

In accordance with the provisions of the aforementioned Ministry orders dated 23.04.2020 and 20.07.2021, gratuity and cash payment in lieu of leave for Central Government employees who retired on or after 01.01.2020 and up to 30.06.2021 must be calculated using the DA rate of 17 percent of basic pay, according to the new official memorandum (O.M) issued on 7th September 2021.

In the O.M the Department of Expenditure (DoE) has said that "Keeping in view that gratuity and cash payment in lieu of leave are one-time retirement benefits admissible to employees on retirement and employees who retired during the period from 01.01.2020 to 30.06.2021 have been allowed lesser amount than what would have been calculable but for the aforesaid orders of this Ministry dated 23.04.2020 and 20.07.2021, the matter has been considered sympathetically with a view to allowing the same to such employees."

As a result, it has been announced that for Central Government employees who resigned on or after January 1, 2020, and before June 30, 2021, the amount of DA to be considered in the determination of gratuity and cash payment in lieu of leave will be as follows:

Employees retiring during the period	Notional Percentage of Dearness Allowance (DA) for calculation purpose
From 01.01.2020 to 30.06.2020	21% of basic pay
From 01.07.2020 to 31.12.2020	24% of basic pay
From 01.01.2021 to 30.06.2021	28% of basic pay

DoE has further clarified that "All other conditions as stipulated in CCS (Pension) Rules 1972 and the orders of Department of Pension & PW vide O.M. No.7/5/2012-P&PW(F)/B dated 26.08.2016 in respect of employees borne on National Pension System (NPS) and CCS (Leave) Rules 1972, shall continue to be applicable while calculating gratuity and cash payment in lieu of leave respectively."