The government’s new labour codes, effective from November 21, 2025, have introduced a big change in gratuity rules.
Now, some employees can claim gratuity after just one year of continuous service, instead of the previous five-year requirement.
These changes mainly target fixed-term and contract employees, making the benefit system more inclusive and fair for short-term workers.
Who Can Claim Gratuity Early?
Under the new rules:
Fixed-term and contract employees can now receive gratuity on a pro-rata basis, depending on how long they have worked.
Even working for one or two years can make them eligible for a partial payout.
Permanent employees still need five years of continuous service to claim gratuity.
Exceptions exist only in cases of death or disability, where payment can be made earlier.
This ensures short-term workers are no longer left out of gratuity benefits.
How Gratuity is Calculated Now
Gratuity for fixed-term employees will now be calculated based on the actual duration of service, making it fairer for short-term workers.
Another key change is the definition of wages.
Wages must now be at least 50% of the total cost-to-company (CTC).
This includes:
Basic salary
Dearness allowance
Retaining allowance (if any)
As a result, employees with a previously lower basic salary may now receive higher gratuity payouts.
What This Means for Employees
Gratuity is a lump-sum reward given by employers for long-term service, typically at the time of resignation, retirement, or termination.
With the new labour codes:
More employees, especially contract workers, will be eligible for gratuity
Payouts could increase due to the revised wage structure
The system becomes more inclusive for the formal workforce
Key Date to Remember
These new rules apply to employees joining a company on or after November 21, 2025.
Only such employees can claim gratuity after completing one year of service under the updated system.
