Gratuity New Rule : Now 5 years condition is over; Gratuity even on 1 year job, know the new rule

• Under the new Labor Code, significant changes in the rules of gratuity
• No need to wait for five years to get gratuity
• Eligible for gratuity only after completing one year of service

Gratuity New Rule : Under the new Labor Code, the rules on gratuity have undergone significant changes. Under these provisions, fixed-term employees (FTEs) no longer have to wait for five years to get gratuity. Due to changes in these rules, now only one year of service will be eligible for gratuity. What has changed in the rules”text-align: justify;”> ‘Neither a Parsi, nor a Mumbaikar’; A new controversy has surfaced in Tata Trust! Venu Srinivasan’s resignation, what exactly is the case?

What is Fixed Term?

Earlier, when a company employed an employee on contractual basis, they did not get the same benefits as permanent employees. Now, however, under Fixed-Term, an employee appointed on a written contract for a specific period i.e. generally 1 or 2 years will be taken directly on the payroll of the company. This means that they will get the same pay, leave entitlements and other benefits as permanent employees. As per the prevailing law (Payment of Gratuity Act, 1972), an employee is eligible for gratuity only after completing five years of service. But under ‘fixed period employee’ means FTE, if your contract with the company is for say 1 year and 3 months, you will be paid gratuity for the entire 15 months. This news is especially good news for employees working in project-based work.

In brief, it is mandatory for ‘Fixed Term Employees’ (FTEs) to complete at least one year of service. Employees who will work for less than one year will not be eligible for gratuity. Once the period of one year is over, the Company will calculate the gratuity for each additional month or day worked thereafter and render the service to you; For example, if you have worked for 1 year and 5 months, you will get gratuity for 17 months.

Why the change in rules?

These changes in the rules have been implemented with a focus on individuals who work on small projects or under fixed contracts, usually for 1 or 2 years. The main objective of these changes is to ensure that they also get ‘gratuity’ for their work; And for that they should not have to go through a long period of five years.

Increase in basic salary

According to the new Labor Code, the calculation of gratuity will be salary based. This wage must be at least 50 percent of the total ‘CTC’ of the employee. As per rules, allowances like HRA i.e. House Rent Allowance or Traveling Allowance cannot exceed 50 percent of your CTC. If these allowances exceed the limit of 50 percent, the excess amount will be added to your Basic Salary. This will lead to an increase in basic pay, resulting in an increase in gratuity and PF amounts.

Accelerate Full and Final Settlement

Currently, companies usually take 30 to 60 days to complete the ‘Full and Final Settlement’ (F&F) process. As per the new rules, upon resignation, termination of service or expiry of the contract period, the company will be obliged to pay the gratuity and salary arrears of the concerned employee within two working days.

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