Legal information notice: this article provides general information and isn't a substitute for advice from a qualified lawyer.
You’re leaving a job (or already have) after years of service and want to understand your gratuity entitlement — or your employer hasn’t paid it and you’re not sure whether you actually qualify. Gratuity rules changed with India’s new labour codes, so here’s exactly where things stand now.
Gratuity in India was traditionally governed by the Payment of Gratuity Act, 1972. That Act has now been consolidated into the Code on Social Security, 2020, which came into force nationwide on 21 November 2025. The core entitlement and calculation formula carried over largely unchanged, but there are some genuinely new elements worth understanding.
The standard formula remains: (Last Drawn Wages × 15 × Number of Completed Years of Service) ÷ 26. A few details that matter in practice:
Check your total continuous service against the 5-year threshold, or confirm you qualify under one of the exceptions (death, disablement, or fixed-term contract expiry with at least 1 year and 240 working days served).
This is the standard application for gratuity, ideally submitted within 30 days of your gratuity becoming payable (though delayed applications are often still accepted, particularly with a reasonable explanation).
Your employer is required to calculate the amount and issue a notice specifying what’s payable, typically within 15 days of receiving your application.
Payment is due within 30 days of your gratuity becoming payable — if this deadline passes without payment, your employer owes you the amount plus interest for the delay.
If your employer doesn’t pay despite the deadline, you can file a complaint with the controlling authority under the Code on Social Security, who has the power to direct payment and can initiate recovery proceedings.
The fixed-term contract change is genuinely significant and worth understanding if you’re on a fixed-term arrangement rather than a traditional permanent role — under the old Payment of Gratuity Act, fixed-term employees typically had to complete the same 5 years as everyone else, which most fixed-term contracts never reached. The new pro-rata rule after just 1 year (with 240 working days) means many more fixed-term employees are now genuinely entitled to gratuity for the first time, and this is worth specifically raising with your employer if your contract is ending and you meet this threshold — it’s a change many employers, particularly smaller ones, may not have fully updated their processes to reflect yet.
It’s also worth understanding “continuous service” isn’t broken by every gap — reasonable absences like approved leave, a strike (not due to the employee’s fault), or a lockout generally don’t reset your service clock. If your employer disputes your years of service based on a gap you believe shouldn’t count against you, this is a specific, fact-based argument worth raising rather than accepting their calculation at face value.
Gratuity runs on a genuinely different timeline from your regular salary settlement — don’t assume it’s automatically bundled into your 2-day full and final settlement. It has its own 30-day payment window from the date it becomes payable, which is a separate legal clock entirely.
| Employee Type | Eligibility Threshold |
|---|---|
| Standard/permanent employee | 5 years of continuous service |
| Death or disablement | No minimum service period required |
| Fixed-term contract employee | 1 year of continuous service with 240 working days (pro-rata) |
Gratuity disputes go before the controlling authority appointed under the Code on Social Security, typically at the district level — you can also raise this through the Shram Suvidha portal or your local labour office.
Filing Form I and a complaint with the controlling authority are both free of charge.
Yes — the application and escalation process is designed for direct employee use. A lawyer becomes useful if your employer disputes your eligibility or years of service in a way that requires detailed factual argument.
Need professional legal help with this?
Find a Civil Lawyer on VidyodayIf your regular salary or final settlement is also unpaid, see our guide on salary not paid after resignation. For your PF balance specifically, our PF withdrawal guide covers that separate process.
Generally no, for standard employees the 5-year threshold is a hard requirement unless you fall under one of the specific exceptions (death, disablement, or fixed-term contract expiry).
It can be forfeited, wholly or partially, specifically for termination due to certain serious misconduct — this isn’t automatic, and the specific circumstances of your termination matter.
Coverage thresholds apply based on the number of employees — check whether your specific establishment meets the applicability criteria under the Code on Social Security, as very small establishments may fall outside its scope.
No — the formula sets the statutory minimum; your employer can pay more (if your contract or company policy provides for it) but not less.
Continuous service is generally assessed based on your unbroken employment relationship with the same employer, not the specific role or contract type, provided there wasn’t a genuine break in service.
It’s tax-exempt up to ₹20 lakh for private-sector employees covered under the Act; any amount received beyond that limit is taxable as per applicable income tax rules.
Gratuity isn’t optional or policy-dependent for covered establishments — it’s a statutory entitlement once you meet the eligibility criteria, regardless of whether your employer has a formal internal policy document.
Yes — in the case of death, the gratuity is paid to the employee’s nominee or legal heir, and the 5-year service requirement is specifically waived in this situation.
This article is for general information only and does not constitute legal advice. Consult a labour/employment lawyer for guidance specific to your situation, particularly for disputed eligibility or service-period calculations.
