Karnataka implements Mandatory Gratuity Insurance Scheme

At a glance

• The Karnataka government has introduced the Karnataka Compulsory Gratuity Insurance Rules 2024.
• This move brings Karnataka in line with other states.
• Employers are required to put in place a gratuity insurance policy with a recognised insurer.

 We would like to express gratitude to Trilegal for their contribution on this publication.

The Karnataka government has introduced the Karnataka Compulsory Gratuity Insurance Rules 2024, which requires companies operating solely within Karnataka to secure an insurance policy to cover their gratuity liabilities by March 2024. This move brings Karnataka in line with other states like Andhra Pradesh, Telangana, and Kerala, who have also imposed such requirements on companies operating solely within those respective states.

As part of the requirements, employers will now need to obtain a gratuity insurance policy from a

duly recognised insurer, make timely payment of premiums and policy renewals, alongside submitting renewal notifications to the authorities. Employers must register their establishments and maintain an up-to-date list of employees covered under the gratuity insurance policy. Any changes in employer information must be promptly reported to the authorities to ensure continuous compliance.

This new requirement would impact the traditional ‘pay-as-you-go’ approach to gratuity liabilities – where employers allocate funds for gratuity payments only as they arise. However, companies with a presence in multiple states will not be affected by this, as they are governed by Federal/Central laws as far as gratuity obligations are concerned.