As we embark on the journey of 2024, employers and employees alike are presented with a significant regulatory update: the Karnataka Compulsory Gratuity Insurance Rules 2024. Enacted under Section 4A(1) of the Payment of Gratuity Act, 1972, these rules aim to ensure financial security for employees by mandating employers to obtain a Gratuity Insurance Policy. 

These provisions typically apply to factories, mines, oilfields, plantations, ports, railway companies, as well as shops and establishments with a workforce of 10 or more individuals. It’s important to note that these regulations do not encompass entities under the jurisdiction of either the Central Government or the State Government.

In this comprehensive guide, we’ll navigate through the compliance rules underlying these regulations, offering clarity on the obligations and responsibilities for both employers and employees.

Compliance rules underlying Karnataka Compulsory Gratuity Insurance Rules 2024

Obtaining Insurance Policy

  • Employers covered under the Gratuity Act must procure a Gratuity Insurance Policy by 9th March 2024. 
  • Additionally, new establishments or existing ones not previously under the Act must obtain insurance within 30 days of the Gratuity Rules’ applicability. 
  • The policy should be obtained from a reputable insurer like the Life Insurance Corporation of India, adhering to relevant legislative provisions.

Responsibility to pay Insurance Premium

  • Employers are obligated to pay the insurance premium in full before the policy’s expiry. 
  • They must also notify the Controlling Authority within 15 days of renewing the policy, ensuring transparency and compliance with regulatory requirements.

Registration of Establishment

  • Employers are required to register their establishments with the Controlling Authority within 30 days of obtaining the insurance policy. 
  • This involves submitting Form I along with employee details (Form III) within 15 days of policy renewal or employee changes. 
  • The Controlling Authority, typically the office of the Jurisdictional Labour Commissioner, oversees registration processes and ensures compliance.

Exemption for Gratuity Funds

  • Employers with approved gratuity funds or those intending to establish such funds for 500 or more employees can seek exemption from the insurance policy requirement. 
  • However, existing funds must adequately cover gratuity liabilities as per the Act. 
  • Exempted gratuity funds must adhere to stringent trust establishment criteria outlined in Form II, including registration, trustee composition, investment guidelines, and irrevocability.

Penal consequences

  • Non-compliance with the Gratuity Insurance Rules attracts severe penalties. 
  • Employers failing to register or provide employee details may face imprisonment or fines as per Section 9(2) of the Act. 
  • Additionally, failure to pay premiums or contribute to gratuity funds leads to penalties outlined in Section 4A(5) and 4A(6). 
  • False statements or representations for avoiding payments may result in imprisonment or fines under Section 9(1).

Key Challenges

The implementation of the Gratuity Insurance Rules poses several challenges for employers. The increased compliance burden, including registration and policy renewal reporting, adds administrative complexities. 

Moreover, the absence of periodicity for updating employee details and policy changes adds ambiguity. Establishing irrevocable trusts for gratuity funds further amplifies compliance efforts, particularly for smaller establishments.


Navigating the Karnataka Compulsory Gratuity Insurance Rules 2024 requires diligence and understanding from both employers and employees. Compliance with these regulations ensures financial security for employees while fostering transparency and accountability in the employer-employee relationship. 

Employers must proactively adhere to registration, insurance procurement, and premium payment obligations to avoid penalties and uphold their commitment to employee welfare. By addressing key challenges and embracing compliance as a priority, businesses can navigate the regulatory landscape with confidence and integrity.