New Labour Codes 2025: The biggest confusion among employees and companies regarding the new Labour Code 2025 (how and when will gratuity be implemented) has now been clearly answered by the government.
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New Labor Codes 2025: The government has now provided a clear answer to the biggest confusion among employees and companies regarding the new Labor Code 2025 (how and when gratuity will be implemented). The Labor Ministry has issued new FAQs stating that the new gratuity rules will be effective from November 21, 2025, and not from April 1, 2026, as many had assumed.
What the Government Said
The government has clarified that the new gratuity calculation will not apply to the past. This means there will be no recalculation for previous years of employment. This rule will only apply to the period after November 21, 2025. Furthermore, gratuity will be calculated based on the employee’s last salary at the time of leaving the job.
Why the Confusion
The confusion arose because the Labor Codes came into effect on November 21, 2025, but their draft rules were issued on December 30, 2025, and the government had set a target for full implementation by April 1, 2026. This timeline discrepancy led many to believe that important rules like gratuity would come into effect in April 2026. However, the government has now clarified that the actual effective date is November 2025.
Under the new rules, gratuity will now be linked to the “new definition of wages” established under the Code on Social Security. This will include only the specified wage component, while certain allowances and other payments will not be included. In the case of contract workers, the contractor will be responsible for paying gratuity after completing five years of service.
Changes for Fixed-Term Employees
The biggest change has come for fixed-term employees. Now, if an employee works on a one-year contract and completes the term, they will also be entitled to gratuity. Previously, this typically required a minimum of five years of service, so this change is considered a major relief for employees.
Clarification regarding the 50% wage rule
In addition, clarification has been made regarding the 50% wage rule. If allowances exceed 50% of an employee’s salary, the additional amount will be added to the basic wage, potentially increasing benefits like PF and gratuity. Overtime will be included in wages, but bonuses, gratuities, and retirement benefits will not. Working hours will remain 8 hours a day and 48 hours a week, and overtime will be paid double. Overall, through these FAQs, the government has attempted to address a significant amount of confusion among employees and companies.
