Gratuity Rules: If you are currently employed,this information is beneficial for you. Indeed,with the new labor codes introduced by the central government,a significant change has occurred regarding gratuity for employees. Following the implementation of these regulations,the gratuity amount that employees receive upon retirement or when leaving their job may be greater than it was previously.
Please be aware that these new rules will take effect on November 21,2025,and will not be applied retroactively. This indicates that only those employees who retire or leave their job after this date will be eligible for the benefit. The government has provided clarification on this matter.
One-year period for fixed-term employees
As per the new code,fixed-term employees (FTEs) will qualify for gratuity after completing one year of continuous service. It is important to note that previously,a minimum of five years of service was necessary for this benefit. However,this regulation only pertains to employees who began their employment with a company on or after the date the new labor code was enacted.
How is the calculation done?
Gratuity is determined based on an employee’s final salary and their years of service. Since the basic salary will now represent a larger percentage of the total salary,the lump sum amount received upon departure is also anticipated to rise. Under the new regulations,gratuity will be calculated using the employee’s last salary at the time they leave the company. The reasons for leaving can include retirement,resignation,or death.
What do experts say?
Rishi Agarwal,CEO and co-founder of Teamlease Regtech,stated that if an employee departs from the company after the new rules are in place,their gratuity will be computed based on their final salary. He further explained that this means the increased base salary for calculation purposes will apply throughout the employee’s entire service period,leading to a significant enhancement in their final benefits.
Salary and PF will also be affected
These changes may also impact employees’ in-hand salaries. The increase in basic salary will also increase Provident Fund (PF) contributions,which may slightly reduce your monthly salary. Employers are required to contribute up to 12% of your basic salary,and if they already do so,there will be little change in your PF contribution. Under the new rules,bonuses will also be calculated based on the new wage structure. CA Chandni Anandan,tax expert at ClearTax,explained that under the new code,statutory bonuses are also calculated on the re-determined ‘salary’,subject to the usual eligibility period and monetary limits.
