Gratuity payments to retiring public sector employees will be given as a bank loan in terms of a new scheme formulated by the Government. Such payments will replace the existing system where an employee is paid 24 months of his or her gross salary through the ministry, department or the public organisation he or she served [...]

 

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Govt. shifts pension gratuity to bank loans

New scheme for retiring public servants, but TUs express concern
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Gratuity payments to retiring public sector employees will be given as a bank loan in terms of a new scheme formulated by the Government. Such payments will replace the existing system where an employee is paid 24 months of his or her gross salary through the ministry, department or the public organisation he or she served in. 

Planning of the new scheme has put on hold the payment of gratuity to some 14,000 pensioners for more than six months. More than Rs. 7 billion is due to be paid to these pensioners. Currently the gratuity is deducted in instalments over a 10-year period but the deduction is not more than 10 per cent of the monthly pension.
Under the new scheme the state banks will take over the responsibility of the payments instead of directly channeling government funds.

But trade unionists have expressed doubts about the proposed scheme claiming that the banks could change the criteria to grant such loans and as a result the pensioners could lose the benefit of obtaining a gratuity. “We have previous experience where schemes taken over by the banks have been changed. One such instance was the loans given by the Government for the purchase of land,” National Trade Union Centre official Sarath Lal said. However, Pensions Department Director General S.S. Hettiarachchi said the proposed scheme was a more efficient system as the beneficiaries could receive their funds expeditiously.

He said under the proposed plan, the Government would be able to make better use of the funds and the loans would be provided through banks even without guarantors. He said that once the scheme was introduced the backlog could be cleared in a short period. “By the National New Year, they will receive their arrears,” he said.

The move by the Government comes as the payment of pensions was adding to the Government’s expenses over the years.Mr. Hettiarachchi said that at present, the Government was paying out more than Rs. 140 billion a year with the number of pensioners increasing to 535,000. He said that about eight years ago the Government was paying out only Rs. 80 billion a year to pensions.

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