Description

India’s government now grants gratuity to fixed-term employees after just one year, transforming the labour landscape.

The Union government has revamped India’s labour framework, allowing fixed-term employees to receive gratuity after one year instead of five.

New Delhi:

The Union government has announced changes to India’s labour laws, reducing the minimum service requirement for fixed-term employees to receive gratuity from five years to one year. 

The move forms part of a wider overhaul unveiled on Friday, November 21, which rationalizes 29 existing labour laws into four labour codes.

Eased Gratuity Norms

Among the most significant changes is the easing of gratuity eligibility, a shift expected to reach a large and diverse workforce. Under earlier rules set by the Payment of Gratuity Act, fixed-term employees qualified for the benefit only after five years of continuous employment. 

The new codes relax this requirement, allowing fixed-term employees (FTEs) to access gratuity after completing a single year of service.

Here, the intention is to ensure parity between fixed-term and regular staff. The updated provisions guarantee FTEs the same salary structure, leave entitlements, medical benefits and social security coverage as permanent workers. 

The government believes this alignment “promotes direct hiring and reduces excessive contractualisation,” the centre said in a statement.

Fixed-term employees are hired for a set period or for a specific project. The new rules aim to treat them more like permanent staff. The changes also cover informal, gig, platform workers, migrant labourers and women employees.

Understanding Gratuity

Gratuity is a lump-sum financial payout employers make to workers as a gesture of appreciation for extended service. Traditionally, employees received it upon resignation, retirement or another form of separation after fulfilling the mandatory five-year period. 

With the reworked rules, fixed-term staff will no longer have to wait that long. The government expects the shorter eligibility window to give employees stronger financial stability, particularly during job changes.

New Labour Codes Replace Outdated Laws

India’s patchwork of labour rules dates back to the pre-Independence and early post-Independence decades, when economic conditions were vastly different. 

While many nations have modernised and merged their labour laws over the years, India continued to rely on a mix of fragmented and sometimes outdated legislation spread across 29 Central Acts. This created compliance challenges for employers and uncertainty for workers.

The introduction of the four Labour Codes will replace these older structures with a more coherent system. The intention is to support both employees and businesses, enabling a workforce that is more secure, productive and aligned with global standards.

1. Fixed-Term Employees (FTE):
   FTEs will enjoy the same benefits as permanent employees, including leave, medical, and social security.

The eligibility for gratuity has been cut down from 5 years to 1. They will also earn the same wages as permanent staff, boosting their income and security..

2. Gig & platform workers
   The terms ‘gig work’, ‘platform work’, and ‘aggregators’ are now officially defined in a labour code for the first time.

According to the government, the aggregators must now contribute 1–2% of their annual turnover, with a cap of 5% on the total amount paid or payable to gig and platform workers.

Additionally, having Aadhaar-linked Universal Account Numbers will simplify access to welfare benefits for gig and platform workers, making them fully portable and available across different states, no matter where they migrate.

3. Contract workers
   Fixed-term employees (FTE) will enjoy social security and legal protections, similar to those of permanent employees.

The principal employer will provide health benefits and social security benefits to contract workers.

Contract workers will also get free annual health check-up.

4. Women workers
   Gender discrimination against women workers is now legally banned. The government has guaranteed equal pay for women.

Women are now permitted to work night shifts and in all types of work (including underground mining and heavy machinery), subject to their consent and mandatory safety measures.

It is now mandatory to have women’s representation in grievance redressal committees.

The laws also allow the inclusion of parents-in-law in the family definition of female employees, expanding dependent coverage and promoting inclusivity.

5. Youth workers
   A minimum wage has been guaranteed for all workers.

Every worker will receive an appointment letters.

Exploitation of workers by employers is prohibited. The payment of wages during leave has been made mandatory.

To ensure a decent standard of living, workers will receive wages based on the floor wage set by the central government.

6. MSME workers
   All MSME workers are now covered under the Social Security Code, 2020, with their eligibility determined by the number of employees.

The minimum wage is guaranteed for all workers.

Workers will have access to facilities such as canteens, drinking water and rest areas.

They will also benefit from standard working hours, double overtime wages and paid leave.

The government has ensured timely wage payment to MSME workers.

7. Audio-visual & digital media workers
   Digital and audio-visual workers, including journalists in electronic media, dubbing artists, and stunt persons will now receive full benefits.

it is mandatory for employers to provide appointment letters to all these workers. The letter must include the employee’s designation, wages, and social security entitlements.

8. Mine workers

Health safety for all workers will be ensured. Free annual health check-up will be provided.

Limit on working hours has been set to 8 to 12 hours per day and 48 hours per week to ensure health and work-life balance.

9. Hazardous industry workers

All workers will receive free annual health check-ups.

Women can work in all establishments, including underground mining, heavy machinery, and hazardous jobs, ensuring equal job opportunities for all.

A mandatory safety committee at will be established in each site for on-site safety monitoring, and safe handling of hazardous chemicals.

10. Export sector workers

Export sector fixed-term workers will receive gratuity, provident fund (PF), and other social security benefits.

Every worker will have the option of availing annual leaves after 180 days of work in a year.

Every worker is entitled to receive their wages on time and they can’t be subjected to unauthorised wage deductions or any limits on their earnings..

11. Dock workers

All dock workers will get formal recognition, legal protection.

Provident fund, pension, and insurance benefits are assured for all, whether contract or temporary dock workers.

Employer-funded annual health check-ups are mandatory.

Dock workers to get mandatory medical facilities, first aid, sanitary and washing areas, etc, to ensure decent work conditions and safety.