In a major relief for fixed-term employees (FTEs), the government has reduced the minimum service requirement for gratuity from five years to just one year under the new codified labour laws.
Fixed-term employees are hired for a specific period or project, with clear start and end dates in their contracts.
Their employment automatically ends when the term expires, unless renewed by the employer.
Previously, only employees who completed at least five years of continuous service were eligible for gratuity, as per Section 4 of the Payment of Gratuity Act, 1972.
Gratuity is a lump-sum reward paid to employees when they leave a job, retire, or complete their contract.
What the New Labour Codes Mean for Workers
The new four labour codes, consolidating 29 old laws, aim to improve wages, expand social security coverage, and enhance health protections across sectors.
Under these reforms:
Fixed-term employees now receive gratuity after just one year of service.
They are entitled to benefits similar to permanent employees, including working hours, wages, and leave.
The principal employer must provide health benefits, social security, and free annual health check-ups to contractual workers.
This change addresses a common issue where many FTEs left jobs before completing five years and missed out on gratuity.
Legal Recognition for Gig and Platform Workers
For the first time, the new labour codes formally define gig work, platform work, and aggregators, giving legal clarity to millions working with digital platforms.
Aggregator companies are now required to contribute 1-2% of their annual turnover to a dedicated Welfare Fund, capped at 5% of total payments made to workers.
This fund will help provide social security benefits, ensuring better protection for workers in the digital economy.
