Gratuity Rules: If you work for a private company, this news is particularly significant for you. The government has permanently abolished old, complex labour laws and implemented four new labour codes nationwide. These new laws not only take full effect but also grant crores of private-sector employees stronger rights that will significantly improve their social security. The new labour code rules take effect on November 21, 2025. Here are the major benefits companies must now provide under these new regulations.

What is the ‘50% of Salary’ rule?

The most significant and stringent rule under the new labour code concerns your salary structure. It is now legally mandatory for an employee’s basic salary to constitute at least 50% of their total CTC (Cost to Company), with the remaining 50% comprising other allowances.

What will be the impact?

This rule may slightly reduce your monthly take-home salary because your PF (Provident Fund) contribution will be higher than before. However, the major benefit is that when you leave your job or retire, you will receive a substantial, record-breaking lump sum comprising your PF and gratuity.

How ​​have gratuity rules changed?

The government has surprised many by extending gratuity benefits to people previously excluded. Now, employees working on a fixed-term or contract basis will be eligible for the full gratuity amount after completing just one year of service; they no longer need to wait five years with the same company. However, for employees on regular or permanent payroll, the gratuity benefit remains applicable only after completing five years of service, as before.

Mandatory annual bonus

Meanwhile, the Union Ministry of Labour has tightened regulations on private companies regarding festival and annual bonuses. Under the new notification, every company must provide an annual bonus to employees earning a monthly salary of less than ₹21,000.

Find out how much the payout will be:

The annual bonus can range from 8.33% to 22% of the employee’s salary. The law requires companies to pay the bonus. For employees earning more than ₹21,000, bonus payment will depend entirely on the company’s internal policies.