With these new rules coming into effect, there has been a major shift in how gratuity is received. Earlier, employees were required to complete at least five years of continuous service to be eligible for gratuity. However, under the new rules, employees are now set to receive gratuity after just one year of continuous service. Also, the payout can be up to 40% higher.

Implementation

Previously, there was confusion over the implementation of the new gratuity rules. The government has now clarified that the revised gratuity rules will be effective from November 21, 2025. According to the Labour Ministry, gratuity will be applicable from the date the Code comes into force, and establishments can make provisions in line with standard accounting practices.

One-year rule

The one-year gratuity benefit is not applicable to all employees. It comes with specific eligibility conditions. Under the new framework, this provision is limited to fixed-term employees (FTEs) and contract workers, who will receive gratuity on a pro rata basis. In contrast, permanent or regular employees are still generally required to complete five years of continuous service to qualify, except in cases such as death or disability, where separate rules apply.

Higher payouts

In effect, only those workers who join an organisation under the new labour code regime and meet the fixed-term or contractual criteria will be eligible to receive gratuity after completing one year of continuous service with their employer. Additionally, with the introduction of the new rules, the salaried class is expected to receive higher payouts.

The calculation