New Labour Code Gratuity Rules Explained: Key Highlights

India is undergoing a major labour reform with the implementation of the New Labour Code, replacing 29 outdated labour laws with 4 simplified and modern codes. These include:

Code on Wages (2019)

Industrial Relations Code (2020)

Social Security Code (2020)

Occupational Safety, Health & Working Conditions Code (2020)

The goal is to create a more employee-friendly, transparent, and business-friendly work environment.

Why the Change?

Previous labour regulations were outdated and complex. The new codes focus on:

Wage standardization

Workplace safety

Social security expansion

Faster dispute resolution

This benefits both employers and employees while improving India’s ease of doing business.

Major Changes Under the New Labour Code

✔ Working Hours

Maximum 48-hour work week

Option for a 4-day work week

Overtime paid at 2x wage rate

✔ Salary Structure & PF

Basic pay must be at least 50% of CTC

Higher PF and gratuity contributions

Slight reduction in take-home salary but better long-term savings

New Labour Code Gratuity Rules

One of the most significant updates is related to gratuity eligibility. Under the New Labour Code Gratuity Rules:

Eligibility reduced from 5 years to just 1 year

₹20 lakh gratuity tax exemption limit remains the same

Applies to full-time, contract, platform, gig, and temporary workers

This change increases financial security and benefits a much larger workforce.

Leave & Social Security Updates

Minimum 180 days required to earn leave

Leave can be carried forward and encashed

Social security now covers gig and platform workers with PF, ESIC, maternity benefits, and insurance.

Work-From-Home Recognition

For the first time, remote and hybrid working models are officially acknowledged in labour law through mutual agreements.

Impact of the New Labour Code

For Employees:
✔ Higher retirement benefits
✔ More workplace protection
✔ Transparent wage structure

For Employers:
✔ Simplified compliance
✔ Flexible working models

For India:
✔ Better labour management
✔ Stronger investment climate

Conclusion

The New Labour Code aims to modernise India’s labour system, create wage transparency, improve employee rights, and simplify compliance for businesses. With changes like salary restructuring, flexible working hours, and the impactful New Labour Code Gratuity Rules, India is building a more organised and equitable work environment for the future.