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The implementation of four new labor laws in the country has generated considerable discussion. These new laws will replace 29 old labor laws. These new labor codes were enacted five years ago. The new laws include numerous reforms, including providing appointment letters to every employee, eliminating the distinction between skilled and unskilled workers in minimum wages, social security, insurance for gig workers, night shifts for women, cabs and security, and double pay for overtime, which will be extremely beneficial for millions of employees. One of these reforms concerns gratuity.

Gratuity for even one year of service
The new gratuity rules are generating considerable discussion. Under the new codes, even employees who have worked for one year will be eligible for gratuity. Previously, gratuity was required at least five years of continuous service with a company. Now, any employee who has served a company for one year continuously will be eligible for gratuity.

What were the gratuity rules previously?
Gratuity has generally been considered a symbol of loyalty, a reward for continuous and dedicated work with the same company. Previously, the limit was five years, and this was considered the norm. Now, even one year of service will qualify you for gratuity. Government employees typically receive gratuity upon retirement. However, those who have served five years in private companies are also eligible for gratuity. Gratuity is also awarded in the event of an untoward incident while employed. This limit has now been reduced to one year.

If you have caused damage to any property of the company/institution during your employment, that damage can also be compensated from your gratuity.
How much gratuity will you receive? What is the formula?
The formula for calculating gratuity is very simple. It depends on your monthly basic salary and years of employment. Learn the formula:

Total Gratuity = (Last Basic Monthly Salary) x (15/26) x (Years of Employment)
For example, suppose you joined a job in November 2020 and resigned in November 2025. Your last salary was ₹1 lakh, of which ₹50,000 was your basic salary. Your gratuity would be:

50,000 x (15/26) x 5 = ₹1,44,230

You might also wonder where the number 26 comes from in the formula. In fact, 11 months of the year have 30 or 31 days, while February has 28 or 29 days. But according to the Labor Code, subtracting at least four weekly holidays equals 26. This is where the 26 in the formula comes from.

Now, suppose someone joins a job today, in November 2025, with a basic salary of ₹70,000, and resigns a year later, in November 2026. The gratuity they will receive is:

70,000 x (15/26) x 1 = ₹40,385
This means you won't lose money overall. Even if you haven't served for five years, but have served for only one, two, or three years, you will still receive gratuity.

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