The Government of India’s 2025 implementation of the New Labour Codes marks a historic transformation in worker welfare, social security, and workplace standards. One of the most impactful changes is the revised gratuity rule, where Fixed-Term Employees (FTEs) now become eligible for gratuity after just one year of continuous service, replacing the earlier five-year requirement.
Along with this major financial protection reform, the labour codes bring extensive updates such as universal minimum wage coverage, expanded ESIC and PF benefits, gender-neutral employment opportunities, simplified compliance, enhanced safety norms, and social security for gig and platform workers.
This historic decision replaces 29 old labour laws and introduces a modern, simplified and unified labour framework for India’s workforce .
A major highlight is the New Gratuity Rule, allowing Fixed-Term Employees (FTEs) to receive gratuity after just 1 year of service—earlier, the minimum requirement was 5 years.
Key Changes Before vs After Labour Codes
| Category | Before Labour Codes | After Labour Codes (2025) |
|---|---|---|
| Appointment Letters | Not mandatory | Mandatory for all workers |
| Social Security | Limited coverage | PF, ESIC, insurance for all—including gig & platform workers |
| Minimum Wages | Only for scheduled industries | For all workers across India |
| Health Checkups | No mandatory annual check-up | Free annual health check-up for workers aged 40+ |
| Women Employment | Restricted night shifts | Free to work in all sectors including night shifts (consent required) |
| Wage Payment | Not strictly enforced | Mandatory timely wage payment |
| ESIC Coverage | Limited to notified areas | Pan-India coverage; even 1 worker in hazardous units requires ESIC |
| Compliance | Multiple licences & returns | Single registration, single licence, single return |
Source Url: https://labour.gov.in/sites/default/files/pib2192463.pdf
New Labour Codes Gratuity Rule (2025)
Under the Code on Social Security, 2020, the gratuity norms have undergone a major transformation:
New Gratuity Rule Highlights
- Fixed-Term Employees (FTEs) become eligible for gratuity after 1 year of continuous service
(Earlier: Minimum 5 years required) pib2192463 - FTEs get gratuity benefits equal to permanent employees
- Encourages formal employment & direct hiring
- Reduces exploitation and excessive contractualisation
- Designed to provide financial security to short-term workers
Who Benefits?
- Fixed-Term Employees
- Contract Workers
- Workers in Export, IT, MSME, Digital Media, and Textile sectors
- Gig & Platform Workers (via social security and aggregator contributions)
Benefits Across Worker Categories
1. Fixed-Term Employees (FTE)
- Equal benefits as permanent workers
- 1-year gratuity eligibility
- Leave, medical, PF, and ESIC coverage
- Higher job security & income stability
2. Gig & Platform Workers
- First time legally defined in India
- Aggregators must contribute 1–2% of annual turnover to social security funds
- Aadhaar-linked Universal Account Number ensures portable benefits
3. Women Workers
- No gender discrimination
- Equal pay for equal work
- Permission to work night shifts with consent & safety provisions
- Mandatory representation in grievance committees
- Parents-in-law added to definition of “family” for women employees
4. Youth Workers
- Minimum wage for all
- Mandatory appointment letters
- Wage protection during leave
- Guaranteed floor wage set by Central Government
5. MSME Workers
- Full social security coverage
- Standard working hours & double overtime wages
- Facilities like drinking water, canteen, rest areas
- Timely wages ensured
Other Major Sectoral Benefits
Beedi & Cigar Workers
- Minimum wages
- 8–12 hrs/day, 48 hours/week cap
- Double wages for overtime
- Bonus eligibility after 30 days
Plantation Workers
- ESIC medical facilities for workers & their families
- Safety training & protective equipment mandatory
Digital & Media Workers
- Mandatory appointment letters
- Time-bound wage payment
- Double overtime wages
Mine Workers
- Free annual health checkup
- National safety standards
- 8–12 hr/day and max 48 hr/week
Hazardous Industry
- Mandatory safety committee
- Equal opportunities for women
- Strict safety norms
Additional Reforms Under Labour Codes
- National Floor Wage across India
- Gender-neutral opportunities, including protections for transgender workers
- Inspector-cum-facilitator system to promote compliance instead of penalties
- Two-member Industrial Tribunals for faster dispute resolution
- Mandatory safety committees in units with 500+ workers
- Social security portability across states
- Massive increase in workforce social-security coverage (from 19% in 2015 to 64% in 2025)
FAQs
Fixed-Term Employees (FTEs) are now eligible for gratuity after just 1 year of service—earlier 5 years were required.
No. The 1-year gratuity benefit is specifically for Fixed-Term Employees. Permanent employees still remain eligible after 5 years of continuous service.
Yes. If contract workers complete the required service duration (as applicable), they are eligible for gratuity. For FTE contract workers, the 1-year rule applies.
The new rule aims to:
Protect short-term workers
Encourage direct hiring
Reduce excessive contractualisation
Ensure financial security even in short-duration employment
Yes. The calculation formula remains the same. FTEs simply become eligible earlier.
Yes. The Labour Codes apply nationwide and cover all sectors where fixed-term employment exists.
Yes. Non-payment or delayed payment of gratuity can attract penalties under the Social Security Code.
Tax rules remain the same. Gratuity is tax-exempt up to the limits defined under the Income Tax Act.
The rule becomes effective 21 November 2025, along with the implementation of all four Labour Codes.
Conclusion
The new Labour Codes represent a monumental shift towards a modern, flexible, and worker-centric framework. With the Four Labour Codes Implementation coming into effect, the biggest benefit for employees—especially fixed-term and contract workers—is the reduced gratuity eligibility to just one year, making financial protection widely accessible.
These reforms strengthen India’s workforce, reduce compliance burdens for industries, and support a future-ready labour ecosystem that aligns with global standards.