Fixed-Term Job? You Now Get Gratuity After 1 Year, Not 5

Eligibility at a glance

• Are you a fixed-term employee on a written contract for a fixed period?
• Have you completed at least one year of continuous service?
• If yes to both, you qualify for pro-rata gratuity for the period you actually worked, even if you never reached the old five-year mark.

If you are a fixed-term employee in India who has finished one full year, you are now legally entitled to gratuity on a pro-rata basis, instead of waiting the usual five years. This change took effect when the Code on Social Security, 2020 came into force on 21 November 2025.

Under Section 53 of the Code on Social Security, 2020, a fixed-term employee earns gratuity after one year of continuous service, paid pro-rata for the period worked. The old five-year minimum still applies to regular and permanent staff. The gratuity formula is unchanged: 15 divided by 26, multiplied by last drawn wages, multiplied by years of service.

Ramesh joins a manufacturing company in Pune on a fixed-term contract. His last drawn monthly wage (basic plus dearness allowance) is Rs 30,000. His contract runs for 3 years, and he completes all 3 years.

Apply the formula:

• Gratuity = (15 / 26) x Rs 30,000 x 3
• Gratuity = 0.5769 x Rs 30,000 x 3
• Gratuity = about Rs 51,923

Under the old rule, Ramesh would have received nothing, because he never crossed five years. Under Section 53, he is paid pro-rata for the three years he actually served. For a fixed-term worker whose service is not a whole number of years, the amount is worked out proportionately for the part-year period as well.

The death and disablement carve-outs continue as before: in those cases the minimum-service condition does not apply to any employee.

Gratuity is not always paid automatically, so it helps to put your claim in writing.

1. Apply in writing. Submit a written application, commonly Form I, to your employer once gratuity becomes payable, usually within 30 days of your last working day.
2. Employer must respond. The employer works out the amount due and tells you the figure and the date of payment.
3. 30-day payment window. Under Section 56 of the Code, the employer must pay the gratuity within 30 days from the date it becomes payable.
4. Interest on delay. If payment is late, the employer must pay simple interest from the due date until actual payment, unless the delay was your fault and the competent authority allowed it.
5. Go to the controlling authority. If the amount is disputed or unpaid, apply to the competent controlling authority under the Code. It hears both sides and directs payment of what is due.

For a step-by-step view of how the new codes reshape your gratuity and wage rights, read our guide to the new labour codes. Fixed-term roles often affect women workers and contract staff differently, so also see women at work rights under the new labour codes.

If your employer ignores you, an RTI or a written legal demand can break the silence. The The RTI Playbook explains how to escalate cleanly, and the AI RTI Drafter helps you frame a sharp application. You can also track your reply deadlines with the Timeline Tracker.

Yes. Section 53 of the Code on Social Security, 2020 entitles a fixed-term employee to gratuity on a pro-rata basis after completing one year of continuous service. The five-year wait does not apply to them.

The rule started when the Code on Social Security, 2020 came into force on 21 November 2025. The Code consolidates several older laws, including the Payment of Gratuity Act, 1972.

The formula is 15 divided by 26, multiplied by last drawn wages, multiplied by years of service, the same as for permanent staff. For fixed-term workers it is computed pro-rata for the actual period worked, including any part-year.

Yes. Regular and permanent employees still need five years of continuous service. The reduced one-year threshold applies only to fixed-term employees. The death and disablement exceptions continue for everyone.

First apply in writing using Form I. If the employer delays beyond 30 days, you can claim simple interest. If the amount is still disputed or unpaid, apply to the competent controlling authority, which can direct payment after hearing both sides.

Gratuity received by an employee enjoys a tax exemption up to a notified limit, with any excess being taxable. Because the exact cap can change by notification, confirm the current figure with the Income Tax Department before you file your return.

Your gratuity claim checklist

1. Confirm you are on a fixed-term contract and have completed one year.
2. Note your last drawn wages and exact years of service.
3. Calculate the amount: 15/26 x wages x years.
4. Submit Form I to your employer in writing and keep a copy.
5. Track the 30-day payment window; claim interest if it is missed.
6. If unpaid, approach the competent controlling authority.

Next steps: If your gratuity is stuck because of a related provident fund issue, see what to do when your PF claim is rejected without reason. Keep every contract, payslip and letter safe, since they are the proof your claim rests on.

Reviewed for accuracy by Dr. Shrawan Kumar Pathak.