Gratuity New Rules : The Central Government on Friday announced the implementation of four new labour codes by consolidating 29 old labour laws, marking a historic reform in the country’s labour framework. The objective of these new labour codes is to modernize decades-old regulations, provide greater flexibility to industries, and ensure better protection for workers. The government stated that this step will help create a future-ready and strong workforce in line with changing times.
According to the official statement, the new labour codes will work towards modernizing labour regulations, enhancing worker welfare, and adapting the labour ecosystem to evolving work practices. These reforms will accelerate the goal of Atmanirbhar Bharat (Self-Reliant India) and make industries more flexible and competitive.
What is Gratuity
Gratuity is a lump sum amount given by an employer to an employee as a mark of respect for their long and continuous service. Earlier, a minimum of five years of continuous service was mandatory to be eligible for gratuity, and this benefit was available only upon retirement, resignation, or termination of service. This system had been in place for decades, but the new labour codes have introduced significant changes.
The biggest change under the new labour codes is for Fixed-Term Employees (FTEs). Previously, they were required to complete at least five years of service to be eligible for gratuity. Under the new rules, they will now be entitled to gratuity after completing just one year of service. This will bring equality between fixed-term and permanent employees.
Gratuity New Rules : What is the Government’s Objective
The government aims to ensure that fixed-term employees receive the same salary structure, leave benefits, medical benefits, and social security coverage as permanent employees. Additionally, 50% of the total remuneration will be considered as part of the wage calculation, ensuring accurate computation of gratuity, pension, and other social security benefits.
The new rules also provide relief to fixed-term employees working in the export sector. They will now be entitled to gratuity, Provident Fund (PF), and other social security benefits, thereby strengthening their financial security.
Shifts of 8 to 12 Hours to Be Implemented
The labour codes also introduce major changes in working hours. Companies can now implement shifts ranging from 8 to 12 hours, provided that the total weekly working time does not exceed 48 hours. In addition, overtime will be paid at twice the normal wage rate, whereas earlier the daily working limit was restricted to 9 hours.
Reforms have also been made in provisions related to contract workers. Contractors will now need only a single license to operate across the country, valid for five years. This will simplify the contract system and make operations easier for industries.
For the first time, the new labour codes have officially recognized gig and platform workers such as cab drivers, food delivery partners, and others. These workers will now be covered under social security schemes, giving a boost to the rapidly growing gig economy.
The labour code also formally recognizes work-from-home for employees in the service sector. This provision will be based on mutual consent between employers and employees, increasing flexibility in the workplace and promoting a modern work culture.