Karnataka Compulsory Gratuity Insurance: New Framework To Meet With Gratuity Liabilities

Background

The Government of Karnataka published the Karnataka Compulsory Gratuity Insurance Rules, 2024 (Karnataka Gratuity Rules) in the Official Gazette on 10 January 2024, bringing the same into effect on the same day. With the introduction of such a significant move, Karnataka joins Andhra Pradesh, Telangana, and Kerala, in incorporating a mandatory requirement for employers to obtain an insurance policy to meet with their liabilities under the Payment of Gratuity Act, 1972 (Gratuity Act). In this update, we discuss the key provisions of the Karnataka Gratuity Rules and their implications on employers operating in the state.

Understanding the Statutory Regime

Section 4A of the Gratuity Act provides that once the said provision is implemented by the 'appropriate government', every employer that falls within jurisdiction of the appropriate government and is covered under the Gratuity Act would be required to obtain an insurance to meet with its liability