Gratuity Rule: For employed people, gratuity is a recognition of their service, which is given by the company in the form of a lump sum amount. This payment is made under the Payment of Gratuity Act, 1972 and is generally given after five years of continuous service. It is important to note that this service should be in the same company; the total experience in different companies is not counted.

Also, the gratuity rule is applicable only when an organization has at least 10 employees. If your office runs on 5-day working hours, then you become eligible for gratuity after 4 years 190 days, whereas in 6-day working hours this limit becomes 4 years 240 days.

The 5-year condition is not applicable in this case

This five-year requirement does not apply in many situations. If an employee dies while in service or becomes permanently disabled due to a serious illness or accident, gratuity must be paid immediately. In such circumstances, the amount is received by the employee, their nominee, or legal heir. The government has enacted this rule to ensure that families are not faced with financial hardship in the event of sudden hardship and to ensure the employee’s rights are protected.

Now eligible in just 1 year

A major change under India’s Code on Social Security 2020 will come into effect on November 21, 2025. Following this, fixed-term or contract employees will be entitled to gratuity after just one year of continuous service. This change is a major relief for employees who, despite being with the same company for a long time, still await permanent status. In the media industry, under the Working Journalists Act, 1955, journalists are entitled to gratuity after just three years of service, giving them an additional advantage compared to other professions.

Your gratuity may increase due to the new 50% salary rule

Another important rule in the Social Security Code states that your basic pay + DA (Dearness Allowance) must constitute at least 50% of your total CTC. Companies must determine their salary structures accordingly. If this happens, employees’ gratuity amounts are likely to be higher than before, as it is calculated directly from your basic salary. The gratuity formula is:

(Last Basic Pay × 15 / 26) × Completed Years of Service.

That means the longer the job and the higher the basic salary, the higher the gratuity.