The new labor codes in India have significantly altered gratuity eligibility, allowing employees to receive gratuity after just one year of continuous service, reduced from the previous five years. This change, effective from November 21, 2025, applies specifically to fixed-term employees and contract workers, while permanent employees will still require five years of service for gratuity eligibility, except in cases of death or disablement. Under the updated framework, gratuity will be calculated based on a new definition of wages, which now mandates that basic pay, dearness allowance (DA), and retaining allowance together must constitute at least 50% of an employee’s total cost-to-company (CTC). This shift is expected to lead to a 66% increase in gratuity payouts for many employees, as the calculation will now favor a higher proportion of basic pay compared to allowances. The government has clarified that only those who join after the new labor codes are implemented will benefit from these changes.