The New Labour Codes 2025 bring a major update: fixed-term and contract employees in both government and private sectors will now receive gratuity after completing just one year of continuous service. This marks a big shift from the earlier requirement of five years.
However, the benefit does not extend to permanent employees, who must still complete five years of continuous service to qualify for gratuity. According to the Code on Social Security, 2020, the one-year rule is a specific entitlement created only for fixed-term workers. Legal experts confirm that no amendments have been made to change the eligibility requirement for permanent staff, except in cases of death or disability.
Gratuity, governed by the Payment of Gratuity Act, 1972, is a financial benefit employers give to appreciate long-term service. It is usually paid at retirement or resignation but is also provided irrespective of service duration in cases of death or permanent disability.
As companies prepare for the rollout of the new codes, clarity on eligibility remains crucial for India’s workforce.
