The central government on Friday made a major change in India’s labour laws. Twenty-nine labour laws have been combined into four simplified labour codes. According to the Labour Ministry, the goal of this restructuring is to ensure better wages, more social security, and improved health protection for workers in different sectors.
Earlier, under the Gratuity Act, permanent employees could get gratuity only after working in an organization for five continuous years.
With the new labour law, the gratuity period for permanent employees has been reduced. Now, these employees will be eligible for gratuity after just one year of service. The Labour Ministry said this change is aimed at making fixed-term employees equal to permanent employees.
Employees Now Eligible for Equal Benefits
From now on, employees on fixed-term contracts will also receive equal pay, leave, health benefits, and social security. The government believes this change will reduce the financial gap between permanent and contractual employees.
What is Gratuity?
Gratuity is a financial benefit given by an organization to employees as a symbol of gratitude for long-term service. Until now, employees could get gratuity only after working for five years. This gratuity was given as a one-time lump sum.
This benefit was available even if an employee retired, resigned, or changed companies. With the new rules, the waiting period has been reduced from five years to one year.
Many sectors, including factories, mines, oil fields, ports, and railways, are covered under the Gratuity Act. Employees of government, state-owned organizations, and private companies all receive this benefit.
How to Calculate Gratuity
The formula for calculating gratuity is:
- Private employees: (Last salary × Length of service × 15) ÷ 30
- Government employees: (Last salary + Dearness Allowance) × Length of service × 15 ÷ 26
For example, if an employee’s last salary is ₹50,000 per month, after five years, their gratuity will be ₹1,44,230, including basic pay and dearness allowance.