Daijiworld Media Network - New Delhi

New Delhi, Nov 23: Fixed-term employees across India will now be entitled to gratuity after just one year of service, a significant change from the earlier five-year requirement, as the union government unveiled a major overhaul of the country’s labour framework. The reform consolidates 29 existing labour laws into four simplified labour codes.

According to the Union Labour Ministry, the restructuring aims to ensure better wages, wider social security coverage, and enhanced health protections for workers across sectors.

A fixed-term employee is defined as an individual hired under a contract that specifies a predetermined end date or concludes upon completion of a specific task or project. The reforms also extend to informal workers, gig and platform workers, migrant labourers, and women employees.

Gratuity eligibility relaxed

Under the Payment of Gratuity Act, fixed-term employees previously became eligible for gratuity only after completing five years of continuous service. With the new labour codes taking effect, this tenure requirement has been relaxed, and fixed-term employees (FTEs) will now qualify after just one year of service.

The ministry said the objective of this change is to bring fixed-term employees on par with permanent staff. Under the updated rules, FTEs will be entitled to the same salary structure, leave facilities, medical benefits, and social security measures as regular employees. The government expects the move to reduce over-reliance on contract staffing and encourage more transparent direct hiring.

Understanding gratuity

Gratuity is a financial benefit paid by an employer to an employee in recognition of long-term service. Traditionally, it was provided when an employee resigned, retired, or separated from an organisation after completing five years. With the revised framework, fixed-term contract employees will receive gratuity after just one year, offering a stronger financial cushion during job transitions.

The Payment of Gratuity Act covers a wide range of establishments, including factories, mines, oil fields, ports, and railways. While earlier speculation suggested the eligibility period might be reduced to three years, the government’s decision to lower it to a single year for FTEs marks a significant relaxation in employee benefits.