Gratuity Rules: On Friday, the central government revealed that new labor codes will be rolled out nationwide. This initiative involves the creation of four major labor codes by merging 29 existing labor laws. The aim is to simplify and modernize outdated and complicated factory and labor regulations, making them more transparent and straightforward.
What is gratuity?
Gratuity refers to a monetary sum that a company provides to its employee as a gesture of appreciation for their long service. Previously, employees needed to have a minimum of five years of continuous employment to qualify for this payment. This amount was only disbursed upon retirement, resignation, or termination of employment.
What has changed in the new labor code?
The regulations have now been simplified significantly. This change has provided considerable relief, particularly for fixed-term employees. As per a PIB press release, under the new labor code, these employees will be eligible for gratuity after just one year of service. This means that both permanent and fixed-term employees will now enjoy the same benefits, including salary structure, holidays, and medical and social security benefits. Moreover, when calculating gratuity and pensions, 50% of the total salary will now be classified as “wages,” which simplifies the calculations. Fixed-term employees in the export sector will also receive PF, gratuity, and other benefits.
New rules for working hours and overtime
With the new code, companies can now implement shifts ranging from 8 to 12 hours, as long as the total weekly hours do not exceed 48. The previous 9-hour limit has been eliminated, and overtime pay will be increased to double. New regulations have also been established for gig workers and those working from home. For the first time, gig workers (like delivery agents, app drivers, etc.) and platform workers have been officially acknowledged in the Labor Code. They will now have access to social security schemes. The Code also incorporates provisions for work-from-home arrangements in the service sector. Additionally, contractors will now only need to obtain a single license.