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New Labour Law 2025: Gratuity Calculation to Change Significantly — Check How Much You Gain on 6, 12 and 24 Lakh CTC

The New Labour Law 2025, implemented from 21 November 2025, is set to bring a major shift in how gratuity is calculated for employees across the country. With the introduction of the revised wage structure and new eligibility rules, both permanent and contract workers will see substantial changes in their retirement benefits. The most notable reform is that contract or fixed-term employees will now receive gratuity after just one year of service, a major relaxation from earlier norms. Along with this, the mandatory 50 percent wage rule will increase the basic salary component, resulting in higher contributions toward PF, NPS, and gratuity.

Who Will Get Gratuity and When

Under the updated rules, the eligibility period for permanent employees remains unchanged at five years of continuous service. However, contract employees will now be eligible for gratuity after completing a single year of employment. While the eligibility criteria differ, the calculation method remains the same for both categories. This shift is expected to bring thousands of fixed-term employees into the gratuity framework for the first time.

Impact of the 50% Wage Rule

The new wage definition states that basic salary, dearness allowance, and retaining allowance must collectively form at least 50 percent of the total salary. If allowances such as HRA or special allowance exceed 50 percent, the excess amount will be shifted into the basic salary. As a result, the basic pay rises, which directly increases the amount used for calculating PF, NPS, and gratuity.

This rule compels companies to restructure their salary components, ensuring compliance while creating a more balanced and transparent wage system. The rise in basic wages translates into improved long-term retirement savings for employees.

How Gratuity Amount Will Increase

According to the revised wage structure, the higher basic salary will increase the gratuity amount significantly. A detailed comparison shows that employees across various CTC brackets stand to gain more than before.

CTC ₹6 Lakh — Gratuity Comparison

Under the new calculation, the higher basic wage pushes annual gratuity to nearly ₹19,000, offering a significant gain.

CTC ₹12 Lakh — Gratuity Comparison

With revised wages, annual gratuity rises by nearly ₹10,000 compared to the old method.

CTC ₹24 Lakh — Gratuity Comparison

Employees in this salary bracket will see an annual gratuity jump of more than ₹18,000.

Why These Changes Matter

The overhaul in gratuity rules under the New Labour Law 2025 aims to provide stronger financial security to India’s workforce. Higher basic pay ensures improved retirement planning through increased contributions to PF and NPS. Moreover, extending gratuity eligibility to contract employees after just a year of service brings greater equity and protection to a large segment of the workforce.

For employees, these reforms translate directly into enhanced savings and better long-term financial stability. For companies, the changes necessitate restructuring but also promote greater transparency and uniformity in compensation practices.

Overall, the new gratuity calculations under the New Labour Law 2025 mark a significant step toward strengthening social security benefits for millions of workers.