Gratuity for employers.

A worker who leaves after five years of continuous service, or after one year on a fixed-term contract, gets 15 days' wages for every year worked: monthly wages ÷ 26 × 15 × years, within 30 days.

Updated 18 October 2026 from the Code on Social Security and the Gazette. How we check

For each yearmonthly wages ÷ 26 × 15
15 days
Due afterone year for fixed-term workers
5 years
Up to
₹20 lakh
Pay withinof it falling due
30 days

Every year adds 15 days' wages.

The amount grows by the same step for each year of service. What changes at five years is who can receive it.

Years 1 to 4fixed-term workers only, and on death or disablement
From year 5every worker, on any exit
Years of service, on Haryana's unskilled minimum wage of ₹15,220.71 a month. Each year adds the same 15 days' wages; a part year over six months counts as a full year. The ceiling of ₹20 lakh is far above these amounts.

Work it out.

On the wages last drawn, basic and DA. Pick the state for its unskilled minimum wage, or type the worker's own.

How the worker leaves
15 days' wages
₹10,647.69
Years counted
6 years
Gratuity
₹63,886.15

A part year counts as a full year only when it is more than six months. Paid within 30 days of falling due.

The rules.

Who it covers

Establishments
Every factory, mine, plantation, port and railway company, and every shop or establishment with ten or more employees on any day of the last twelve months. Coverage continues if headcount later falls.
When it is due
On leaving after at least five years of continuous service: superannuation, retirement or resignation. Five years are not needed on death or disablement, or when a fixed-term contract ends.
Fixed-term workers
Due after one year under the contract, pro rata, with any further part over six months counting as a year.
Continuous service
Uninterrupted service, counting sickness, leave, lay-off and strikes. Where service was interrupted, a year counts if the worker actually worked 240 days in it (190 below ground or in a five-day-week establishment).

How much

The formula
15 days' wages on the rate last drawn for each completed year, and for a part over six months: monthly wages ÷ 26 × 15 × years. A piece-rated worker's wage is the average of the last three months; a seasonal worker gets seven days' wages a season.
Which wages
Basic pay, dearness allowance and retaining allowance (section 2(88)). HRA, conveyance, overtime and commission are left out, unless together they are more than half of pay.
The ceiling
₹20 lakh, the figure notified in 2018 under the Payment of Gratuity Act and kept by the Code's savings clause; no new figure had been notified under the Code when we checked.
Forfeiture
Up to the loss caused, for wilful damage to the employer's property; wholly or partly, for riotous or violent conduct, or an offence of moral turpitude committed in the course of employment.

When and how

Payment
The employer works out the amount as soon as it falls due, whether or not the worker has applied, gives written notice, and pays within 30 days, by bank transfer or demand draft.
Paid late
Simple interest from the due date, at up to the rate the Central Government sets for long-term deposits; no rate had been notified under the Code when we checked.
Nomination
A worker nominates someone after completing one year of service.
Penalty
Up to one year in prison, a fine of up to ₹50,000, or both; for a repeat, two to three years and a fine of ₹3 lakh.

Contract workers

Who owes it
The contractor, as the employer of the workers it supplies. Unlike EPF and ESIC, the Code's gratuity chapter has no clause making the principal employer pay if the contractor does not.
Insurance
The Code requires employers to insure their gratuity liability from a date the government notifies, or run an approved gratuity fund; no date had been notified when we checked.

Questions

Is gratuity payable after one year?

To a fixed-term worker, yes: after one year under the contract, in proportion to service. A regular worker needs five years of continuous service, except on death or disablement.

How is gratuity calculated?

Monthly wages (basic and DA) ÷ 26 × 15, for each completed year and for a part over six months. On ₹18,000 a month after six years that is ₹62,307.69.

Who pays gratuity to contract workers?

The contractor, as their employer. The Code does not make the principal employer liable for it, as it does for EPF and ESIC, so check that your contractor provides for it.

EPF for employers Statutory bonus

Sources (3)
  1. The Code on Social Security, 2020 (Chapter V, sections 53 to 58: gratuity; section 54: continuous service; sections 133 and 134: penalties) Act No. 36 of 2020, 29 September 2020. Ministry of Law and Justice.
  2. Gratuity of up to ₹20 lakh (notified under the Payment of Gratuity Act, 1972; kept by section 164(2)(a) of the Code) S.O. 1420(E), 29 March 2018. Ministry of Labour and Employment.
  3. Social Security (Central) Rules, 2026 (rules 31 to 34: nomination, application, payment of gratuity) G.S.R. 344(E), 8 May 2026. Ministry of Labour and Employment.

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