India’s new Labour Codes came into effect on 21 November 2025. These codes are bringing one of the biggest changes in how workers earn, save, and receive end-of-service payouts. The main attraction is the new rule that allows fixed-term employees to get gratuity after just one year.
Many workers are calling this a major positive change. At the same time, there is strong discussion about how the new wage rules may reduce the take-home salary for many employees.
With a workforce of more than 40 crore people across gig jobs, tech, retail, logistics, and manufacturing, the new rules are reshaping how salaries and benefits will look in the coming years.
Key Takeaways
- Fixed-term employees can now receive gratuity after one year of service.
- Permanent employees continue to need five years, but their gratuity amount becomes higher due to a wider wage base.
- Take-home salary may reduce for many workers as basic pay must form at least 50 percent of CTC.
- Gig and platform workers get new social security benefits for the first time.
- PF, bonus, and maternity calculations now use a wider wage definition.
- Payout timelines are stricter, and companies must release gratuity within 30 days.
A Major Shift in Gratuity Rules
Earlier, all employees needed five continuous years of service to receive gratuity. Under the new framework, the Code on Social Security changes this for fixed-term employees. Workers hired for project-based or short-term roles can now receive gratuity after one year.
The amount is calculated in proportion to the actual months worked. This is a major benefit in sectors with high attrition such as technology, e-commerce, logistics, and retail.
Permanent employees still need five years to qualify. But their gratuity amount becomes higher because the new rules expand what counts as “wages.” Employers can no longer reduce basic pay by adding too many allowances. If allowances go beyond 50 percent of CTC, the extra part moves back into wages for calculation.
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Gratuity Rules Before and After the Change
| Aspect | Old Rules | New Rules | Impact |
|---|---|---|---|
| Eligibility | Five years for all employees | One year for fixed-term, five years for permanent | Workers changing jobs more often can now get payouts they missed earlier |
| Wage Base | Mostly basic pay | Basic pay plus DA plus retention and adjusted allowances | Gratuity amount increases because of wider wage base |
| Payout Time | No clear timeline | Must be paid within 30 days | Faster access to money when leaving a job |
| Coverage | Mainly permanent staff | Includes fixed-term, gig, platform, and migrant workers | Wider coverage for India’s growing flexible workforce |
A mid-level employee earning a CTC of 10 lakh rupees can now get a higher gratuity due to the expanded wage calculation. Many experts expect the government to increase the 20 lakh rupee ceiling in the future without passing a new law.
Five Other Key Changes You Will Feel in Your Daily Work Life
Beyond gratuity, the Labour Codes bring structural changes that affect retirement savings, job flexibility, working hours, and worker protections. Below is a listicle capturing the most important updates:
- PF Contribution Based on Wider Wages
PF will now use the expanded wage definition. As a result, your retirement savings may grow 5 to 10 percent faster than before. At the same time, your monthly in-hand salary may fall because companies cannot keep basic pay too low. - Social Security for Gig and Platform Workers
For the first time, gig workers like delivery partners and app-based drivers get formal recognition. Companies must contribute a small part of their turnover to a dedicated social security fund. These benefits may include insurance and health support. - Free Health Checkups for Older Workers
Employees above 40 years of age will get mandatory annual health checkups. This rule is aimed at supporting long-term worker well-being and reducing medical issues in high-stress sectors. - More Flexibility in Working Arrangements
Work-from-home gets official acceptance in service industries. Daily working hours can go up to 12, within a weekly limit of 48. Overtime payments must be made at double the normal rate. - Timely Wage Payments and Stronger Protection
Companies must follow strict timelines for releasing salaries. Minimum wage floors apply across sectors, and gender equality rules are strengthened. Contractors can now use one license across the country for five years, reducing compliance hurdles for smaller firms.
These changes aim to build a workforce that is ready for future economic demands. Analysts say this structure may increase payroll expenses in IT and other organized sectors, but will bring more fairness across the labour market.
The Salary Debate: Will Take-Home Pay Reduce?
A major point of concern is the rule that basic pay must be at least half of the total CTC. Earlier, many companies used allowances to keep PF and gratuity contributions low. That practice will not be possible now. As a result, take-home pay may drop by 5 to 10 percent for certain employees.
Some labour groups believe the rules help workers. Others feel they give companies more space to bring short-term contracts. There is also concern about how fast states can update their systems. Smaller firms may face delays while adjusting to the new structure.
What Happens Next
The rollout will continue as states update their regulations. Digital compliance tools, unified contribution portals, and new welfare boards for gig workers are expected over the next few months. Experts also expect bonus ceilings and maternity calculations to be revised under the new wage system.
For workers, the next step is simple. Check your salary structure carefully. Ask your HR team how your CTC will be reshaped. If you work in gig or platform jobs, follow updates on social security contributions. The new rules aim to create a more balanced system with better long-term security.
India’s unemployment rate has fallen to 3.2 percent. With job growth increasing, the new Labour Codes may push the employment market to the next stage by offering more protection and stronger rights for millions of workers.
