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What are the new rules for gratuity eligibility under the new labour codes?
The four labour Codes lay out revised rules for working hours, gratuity, work-from-home arrangement and also has provisions for gig workers.
The Centre on Friday announced the rollout of new labour codes as it consolidated 29 labour laws into four comprehensive labour codes to overhaul the outdated rules governing factories and workers for decades.
The four labour Codes lay out revised rules for working hours, gratuity, work-from-home arrangement and also has provisions for gig workers.
"By modernising labour regulations, enhancing workers' welfare and aligning the labour ecosystem with the evolving world of work, this landmark move lays the foundation for a future-ready workforce and stronger, resilient industries driving labour reforms for Aatmanirbhar Bharat," read the statement.
Also Read | Gratuity eligibility to minimum wages: Key highlights from four labour codes
What is gratuity?
Gratuity is a lump-sum payment made by an employer to an employee as a token of appreciation for their long-term service.
Traditionally, it was paid after five years of continuous service and upon retirement, resignation, or termination.
However, the new labour laws may allow for eligibility after one year of service under certain circumstances, such as for fixed-term contract employees.
What do the new labour codes say on gratuity eligibility?
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, according to the PIB press release on the new labour codes.
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.
Additionally, 50 per cent of the total remuneration (or such percentage as may be notified) shall be added back to compute wages, ensuring consistency in calculating gratuity, pension, and social security benefits.
Export sector fixed-term workers will receive gratuity, provident fund (PF), and other social security benefits.
Key provisions of the new labour codes
Businesses can now employ workers for shifts ranging from 8 to 12 hours a day, as long as the total does not exceed 48 hours a week.
Earlier, daily shifts were capped at 9 hours. Any overtime will be compensated at twice the regular wage rate.
Contractors can obtain a single licence, valid for five years, that allows them to operate across the entire country.
The new labour codes formally define gig and platform work for the first time, bringing these workers under the ambit of social security benefits.
To promote workplace flexibility, the codes also introduce a provision for work-from-home in service sectors based on mutual agreement between employers and employees.
