New Labor Codes 2026: The government has finally addressed the primary confusion faced by employees and companies regarding the new Labor Code 2025, specifically about the implementation of gratuity. The Labor Ministry has released new FAQs confirming that the new gratuity regulations will take effect on November 21, 2025, rather than the previously assumed date of April 1, 2026.
What did the government clarify?
The government has made it clear that the new gratuity calculation will not be retroactive. This rule will only be applicable for the period following November 21, 2025. Additionally, gratuity will be calculated based on the employee’s final salary at the time they leave their job.
What caused the confusion?
The confusion stemmed from the fact that the Labor Codes were set to take effect on November 21, 2025, but the draft rules were not issued until December 30, 2025, with the government aiming for full implementation by April 1, 2026. This inconsistency in timelines led many to mistakenly believe that significant rules, such as gratuity, would only come into effect in April 2026. However, the government has now clarified that the actual effective date is November 2025.
According to the new regulations, gratuity will now be associated with the “new definition of wages” established under the Code on Social Security. This will only encompass the specified wage components, excluding certain allowances and other payments. For contract workers, the contractor will be responsible for paying gratuity after they have completed five years of service.
Changes for fixed-term employees
The most significant change affects fixed-term employees. Now, if an employee works under a one-year contract and fulfills that term, they will also be eligible for gratuity. Previously, this typically required a minimum of five years of service, making this change a considerable relief for employees.
Apart from this, the situation regarding the 50% wage rule has also been clarified. If allowances in an employee’s salary are more than 50%, then the additional portion will be added to the basic wage, which can increase benefits like PF and gratuity. Overtime will be included in the wage, but bonus, gratuity and retirement benefits will not be included in it. At the same time, working hours will remain 8 hours daily and 48 hours weekly, and overtime will be paid double. Overall, through these FAQs, the government has tried to remove a lot of confusion spread among employees and companies to a great extent.
