As a matter of course, gratuity has been seen to be an apposite reward for prolonged service, but effective November 21, 2025, with the labour codes, everything was changed. The reverse side of this legislation offers more scope for the newly hired staff, including those engaged on fixed-term contracts. This is historical with regard to the country’s employees, discovering financial support for millions of workers.
Significant 2025 Updates
- Eligibility Clause: A fixed-term employment qualifies for gratuity after 1 year of continued service.
- Permanent Contract Employees: Gratuities are being given at the end of 5 years of service.
- 50% CTC Rule: Now, half of an employee’s CTC should constitute wages that can be added to gratuity gross.
- Extended Cover: Gig workers and informal workers are now covered by social security benefit.
Gratuity Calculation Table
| CTC (₹ per annum) | Old Gratuity Base | New Gratuity Base (2025) | Impact |
|---|---|---|---|
| 6,00,000 | Lower (basic only) | Higher (includes allowances) | Bigger payout |
| 12,00,000 | Limited | Expanded | More benefits |
| 24,00,000 | Restricted | Comprehensive | Significant increase |
What’s on the Horizon
- Employer Costs: Higher gratuity and PF liabilities could result in a salary increase of about 5–10%.
- Take-Home Pay Impact: For new entrants, net salaries may decrease with more statutory deductions.
- Implication Confusion: States are still struggling with how the one-year eligibility will be implemented.
Why It Matters
Changes in the gratuity rules for 2025 are redesigning the perception of securities for a few reasons. For younger workers, especially in contractual or gig roles, this reform ensures they are not left out of retirement benefits. For employers, it means restructuring compensation packages so that they are balanced between compliance and competition.
Conclusion
The 2025 gratuity reforms under India’s labour codes are a landmark in employee welfare. By reducing their eligibility period to fill-in positions immediately or within a few days from being hired and to the minimum wage, the gratuity is nothing but fairness, even though the current payout is very small. While challenges, including in implementation and the likely increase in employer costs, remain, the result is clear: for an India that keeps moving traditionally, the background for an inclusive and secure future for the workforce.
