The implementation of the new Labor Code has brought significant shifts in employee benefits, particularly regarding gratuity. In a major relief, fixed-term employees are now eligible for gratuity after completing just one year of service, departing from the traditional five-year mandate. For other categories, the existing regulations continue to apply.

Calculating your exact gratuity payout is straightforward. The formula involves taking your last drawn basic salary plus Dearness Allowance (DA), multiplying it by 15, then by the total years of service, and finally dividing the total by 26. Interestingly, any tenure exceeding six months is rounded up to a full year. For instance, a tenure of 6 years and 7 months is treated as 7 years for calculation purposes.

If an employee’s combined basic and DA is ₹20,000, a service period of 6 years and 7 months would yield a gratuity of approximately ₹80,769. While the Payment of Gratuity Act of 1972 set certain ceilings, the landscape evolved in 2024 when the limit for central government employees was enhanced to ₹25 lakhs, reflecting the changing economic standards.