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New Labour Law: What changes in gratuity contribution and who stands to benefit?
Gratuity New Rules 2025, New Labour Law in India: The new codes introduce the concept of Fixed Term Employment (FTE), under which the employers will be able to hire workers directly under a fixed-term contract.
The Centre reduced the gratuity eligibility for fixed term employees (FTEs) to just one year. (File Photo)
New Labour Law in India: The government on Friday announced that the four Labour Codes – the Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020 and the Occupational Safety, Health and Working Conditions Code, 2020 are being made effective from November 21, rationalising 29 existing labour laws.
New labour laws gratuity
With the new labour codes coming into effect, the Centre introduced the concept of Fixed Term Employment (FTE), under which the employers will be able to hire workers directly under a fixed-term contract.
These employees will be treated at par with regular workers, and for them to avail gratuity, the government has reduced the required term of service to one year from five.
The Centre said all benefits availed by FTEs will be equal to those of permanent workers, including leave, medical, and social security, adding that it “promotes direct hiring and reduces excessive contractualisation.”
What is gratuity?
Gratuity is a payout employers make to workers as a gesture of appreciation for extended service.
Earlier, employees had been receiving their gratuity upon retirement or another form of separation after serving the mandatory five-year period.
As per the new code on wages, gratuity, along with other social security contributions such as provident fund, maternity benefits and bonus, will be based on a larger portion of pay.
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