For Lakhs of private sector employees in India, the New Labor Codes were nothing short of revolutionary. The most talked-about theme was that the long wait of five years would end, and gratuity would begin after just one year of service. However, the reality is that even today, most employees are deprived of this significant benefit and are trapped in a maze of outdated rules. If you are a fixed-term employee and are confused about your gratuity, this article is for you. We will explain in detail why you are not receiving your money despite the central government’s rule change and where this matter is stuck in government files.
Old Gratuity Rules
According to the Payment of Gratuity Act, 1972, currently in force in India, an employee must have completed five years of continuous service with the same company to be eligible for gratuity. This rule was good for those who had held permanent jobs at the same place for decades, but in today’s era of the gig economy and contract culture, it was proving nearly impossible. Often, employees change companies for better opportunities before completing five years, or their contracts expire upon project completion, rendering their years of hard-earned gratuity money void.
What Changed in the New Labor Code
The government made a significant change to the new labor codes in response to the changing job market. The government clarified that if an employee is on a fixed-term contract, they should receive gratuity benefits after one year of service, rather than waiting for five years. The government believed that in today’s times, people don’t stay with the same company for long, so they should receive social security benefits quickly. This move was an attempt to bring contract workers on par with permanent employees.
Why are they not receiving money despite the rules
The biggest hurdle here is the constitutional process. In India, labor is a subject on the Concurrent List, which means that while the central government can make laws, the actual responsibility for implementing them lies with the state governments. Until state governments fully notify their own labor rules, companies are not legally bound to follow the new rules. Currently, several major states, such as Uttar Pradesh, Maharashtra, and Delhi, have not fully implemented these rules, leaving this fundamental right limited to paperwork.
Companies and Old Rules
Due to a lack of clarity from state governments, companies are operating in “safe mode.” They are still following the old 5-year rule because they fear that implementing a new rule without state notification could hinder future audits or legal investigations. Furthermore, paying gratuity in one year would increase the financial burden on companies, which they currently want to avoid. Companies also fear that if they implement the rules arbitrarily, they may have to pay past dues to their former employees.
Which benefits are on hold
Not just gratuity, many other major changes are also on hold due to the non-implementation of the new labour codes. Changes to employees’ take-home pay and PF contributions are also awaiting state approval. Furthermore, provisions such as providing social security to gig workers on platforms like Swiggy and Zomato, the option of three days off for a 12-hour shift, and the right to overtime for working more than 15 minutes—all of these provisions are currently in limbo. Unless state governments demonstrate strong willpower, these benefits are unlikely to be realized.