Karnataka Compulsory Gratuity Insurance Rules, 2024: An Essential Guide for Employers

The Karnataka Compulsory Gratuity Insurance Rules, 2024, notified on January 10, 2024, mark a significant step in protecting employees’ rights—especially in cases where a company becomes insolvent. These rules apply to all Karnataka-based establishments covered under the Payment of Gratuity Act, 1972.

Key Highlights of the New Regulations:

• Mandatory Gratuity Insurance: Employers must secure gratuity insurance through LIC or any other IRDAI-recognized insurer, as per Section 4A of the Payment of Gratuity Act, 1972.

• Gratuity Trust as an Alternative: Instead of insurance, establishments may opt to create a gratuity trust with recurring contributions. However, provisions in the books of accounts alone will no longer be sufficient.

• Third State to Implement: After Tamil Nadu and Andhra Pradesh, Karnataka becomes the third Indian state to enforce such rules.

Compliance Timeline:

• Existing establishments must procure insurance within 60 days of notification.

• New establishments must comply within 30 days of becoming subject to the rules.

• Employers must submit Form 1 to register their establishment within 30 days of acquiring the policy.

• Gratuity policies must be renewed periodically, with a 15-day notice to the concerned authority post-renewal.

Employers should act promptly to ensure full compliance with these updated gratuity norms and avoid penalties.