With the new reforms in labour law, which will come into effect on November 21, 2025, the eligibility criteria for gratuity have been made very easy for fixed-term and contract employees. In the past, the five-year continuous service requirement was the only way to earn gratuity for fixed-term employees who now just have to work one year to be rewarded with it. This revolutionary change is part of the government’s larger initiative to not only modernize the labour regulations but also to provide social-security benefits to the vulnerable worker groups, who have previously been excluded due to the nature of their employment, which does not last long and, thus, has no right to gratuity.
Who Gains: Contract, Gig, and Fixed-Term Workers
The reform has made the impending crisis of the playing field disappear: the fixed-term, contract, and gig-economy workers, along with other short-term staff, are now entitled to gratuity, just like the regular full-time employees—if they just complete the minimum required service. The fact that many workers today often change jobs or take up several short-term assignments simultaneously makes this new rule a safety net—a lump-sum payment even if their employment lasted only a year. Such payment can be quite beneficial during job transitions, layoffs, and the end of contracts.
Gratuity Calculation: What Is Left and What Is Better
Gratuity is still calculated using the same basic formula: approximately 15 days’ wages for each completed year of service. Nevertheless, the term “wages” — which is the basis for calculating gratuity— has been opened up for a wider interpretation. Now salary components such as Basic Pay, Dearness Allowance and some allowances that come under the new wage definition will be included, which will generally result in an increased base amount for the calculations. This modification will allow the employees, whose payment structure consists mainly of non-wage allowances, to receive a larger, more equitable gratuity payout.
What It Implies for Employees
- The contract and fixed-term workers who are similar to IT, retail, construction, services, or seasonal jobs, now are entitled to a legitimate end-of-service benefit after one year only.
- Moreover, workers who change jobs very often or work in the gig economy are provided with a stronger safety net, which makes the job transitions less financially risky.
- Besides, all the improvements in the process like increased transparency and a fairer base for calculation will result in better gratuity amounts for a great number of employees.
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