I have a query related to gratuity for Fixed Term Employment under the new Labour Code. I am sharing the case below:
We issued an appointment letter to an employee for the period from 16 December 2024 to 31 December 2025 with a salary of Rs. 29,545 per month. After completion of the contract period, we renewed the contract from 1st January 2026 to 31 December 2026 with a salary of Rs. 30,408 per month. However, she left the organization on 30 April 2026.
My queries are as follows:
Is gratuity applicable in this case, considering that the new Labour Code became effective from 21 November 2025?
If yes, will her employment period be counted from 16 December 2024 (first contract) or from 1 January 2026 (second contract)? Or 21 November 2025 (labour law effective) ?
Your guidance on this matter will be very helpful to us.
For an FTE, gratuity is payable on completion of 1-year continuous service. In this case, since there is no break in service, the 1-year service condition has been fulfilled on the date of separation i.e. 30.4.2026. Gratuity based on last drawn wages will be payable from 16.12.2024 upto date of separation.
thanks for your response. I have a following question that as per official FAQ no. 8 is that FAQ Whether the gratuity calculation will apply prospectively or retrospectively.
and official response is that : Gratuity will be applicable w.e.f. 21st Nov, 2025 i.e. date of enforcement of the Code.
in above case is Gratuity will become applicable from 16 December 2024 or 21st Nov 2025 ? or not because 21st November 2025 employee has not complete one year period ?
Sl. no 8 of FAQ dated 30.12.2025 says gratuity will be applicable prospectively from 21.11.2025, however please remember there will be retroactive liability for gratuity as and when payable since it is based on Last Drawn Wages and not Basic. Since last drawn wages will differ from Basic on which provision would have been done upto 21.11.2025, the difference will have to be provided for additionally.
As per Sl. no 14 of FAQ of MoEL dated 16.3.2026, FTE will be eligible for gratuity if h/she renders service under the contract for a period of one year from start of contract. In your case, the contract started from 16.11.2024 and her continuous service of one year is 15.12.2025 with FTE gratuity becoming applicable from 21.11.2025, gratuity will be attracted in this case FAQ attached for reference.
While sl.no 8 is regarding no retrospective applicability of gratuity although it will have to be on last drawn wages as and when payable, sl. no 14 is on applicability of gratuity for FTE based on continuous service of one year from date of contract.