SA Gratuity Law : The Indian government has introduced a significant change in the 2025 gratuity policy, potentially affecting lakhs of salaried employees. With stricter rules, redefined eligibility criteria, and capped payouts in certain cases, many workers nearing retirement are now wondering whether they will receive their full retirement bonus or not. Here’s everything you need to know about the new gratuity law, how it could impact your final payout, and what steps you should take to safeguard your benefits.
What Is Gratuity and Why the 2025 Law Matters?
Gratuity is a retirement benefit paid to employees as a token of appreciation for their long-term service. Governed by the Payment of Gratuity Act, 1972, it is typically paid when an employee retires, resigns, or is laid off after completing at least 5 years of continuous service. However, the 2025 amendment aims to streamline this system while reducing misuse.
Key Highlights of the 2025 Gratuity Law Update:
- Restructured eligibility norms
- Revised calculation method
- Sector-specific upper limits
- Inclusion of contract workers in some industries
- Strict documentation and verification process
Who Will Be Affected Most by the New Gratuity Rules?
The new rules are likely to impact a wide range of employees in both public and private sectors. Certain changes could reduce the final payout if employees fall short of the revised conditions.
Here’s who should be cautious:
- Employees with less than 5.5 years of service (rounded-up years now require 240 working days in the 6th year)
- Private sector workers in companies with updated HR policies
- Those nearing retirement or voluntary resignation
- Employees in startups or small firms with relaxed payment policies till now
- Contractual staff under redefined categories
Revised Gratuity Eligibility Criteria 2025
| Criteria | Previous Rule | 2025 Revised Rule |
|---|---|---|
| Minimum Service Period | 5 years | 5 years + 240 days in 6th year |
| Payment Formula | (15/26) × Last Drawn Salary × Years Served | Same, but with capping for certain sectors |
| Tax Exemption Limit | ₹20 lakh | Unchanged |
| Applicability to Contract Workers | Optional, firm-dependent | Mandatory in notified sectors |
| Submission of Documentation | Minimal | Mandatory digital verification |
| Retirement Age | As per company norm | Fixed at 60 for gratuity eligibility |
| Final Approval | Employer’s discretion | Mandatory government e-verification |
How to Calculate Gratuity Under New Rules?
The formula remains largely the same: Gratuity = (15/26) × Last Drawn Basic Salary × Number of Years Worked
However, you must now meet the “minimum 240 working days in the 6th year” condition to qualify for a full sixth year credit. Failure to meet this can reduce your years counted, affecting the payout.
Gratuity Payout Examples (Based on Updated 2025 Law)
| Employee Category | Last Basic Pay (₹) | Years Served | Eligible Years | Total Gratuity (₹) |
|---|---|---|---|---|
| Private Sector – 6.2 yrs | 40,000 | 6.2 | 6 | 1,38,462 |
| Government Employee – 9 yrs | 60,000 | 9 | 9 | 3,11,538 |
| Contract Staff – 5.8 yrs | 30,000 | 5.8 | 5 | 86,538 |
| IT Firm – 10.5 yrs | 75,000 | 10.5 | 10 | 4,32,692 |
| PSU – 7.2 yrs | 50,000 | 7.2 | 7 | 2,01,923 |
Sectors Where Payout Is Capped or Conditional
| Sector | Max Payout (₹) | Special Conditions |
|---|---|---|
| Startups | 10 lakh | Based on funding and tenure |
| SMEs | 7 lakh | Company must be registered with govt portal |
| Private EdTech | 12 lakh | Subject to audit-based approval |
| Government Sector | 20 lakh | No changes |
| Healthcare NGOs | 8 lakh | Only if funded by central schemes |
| Freelancers/Remote | Not eligible | Only applicable if full-time contractual role |
What Should Employees Do to Protect Their Gratuity?
To ensure you don’t lose your gratuity payout, you must:
- Keep employment documents updated and verified
- Check your total working days (including holidays and leaves)
- Monitor your HR records for service continuity
- Avoid last-minute resignation before completing a full year
- Use official e-Gratuity Portals to track your status
Documents Required for Gratuity Claim (2025 Rules)
- PAN Card
- Aadhaar Card
- Bank Account Details (linked to UPI/NEFT transfer)
- Last 3 Salary Slips
- Form ‘I’ (Application for Gratuity)
- Employment Certificate
- Digital Attendance Report (if required)
FAQs on New Gratuity Law 2025
Q1. Is the minimum service period changed?
Yes. You must now work 5 full years + 240 working days in the 6th year for that year to count.
Q2. Can part-time or contract workers claim gratuity now?
Only if the company falls under the notified sectors with revised applicability rules.
Q3. Is gratuity now taxable beyond ₹20 lakh?
Yes. The exemption limit is ₹20 lakh, any amount above this will be taxable as per income slabs.
Q4. How can I apply for gratuity online?
You can visit the official Labour Ministry e-Gratuity Portal or apply via your company’s HR portal.
Q5. What happens if the employer refuses to pay?
You can lodge a complaint with the regional Labour Commissioner or file an online grievance through epf.gov.in.
Whom to Contact for Gratuity Issues
| Department | Contact Number | Email ID | Website |
|---|---|---|---|
| Labour Ministry – Gratuity Cell | 011-23710265 | [email protected] | labour.gov.in |
| EPFO Regional Office | Varies by region | [email protected] | epfindia.gov.in |
| Gratuity Grievance Redressal | 1800-11-8009 | [email protected] | pgportal.gov.in |
| Unified e-Gratuity Portal | N/A | [email protected] | egratuity.gov.in |
| Labour Commissioner’s Office | State-wise | See official state labour portals | state-specific |
With the new gratuity law of 2025 in force, it’s more crucial than ever to stay informed and proactive. One misstep or lack of documentation could cost you lakhs in retirement benefits. If you’re within 1-2 years of completing service or planning to resign, ensure your working days, paperwork, and company policies are aligned with the updated norms. Reach out to the listed contacts for queries and begin your verification as early as possible.
Join
Join