Gratuity Rules 2025: Who Needs to Complete Five Years to Claim Gratuity

Balasahana Suresh
The new labor codes, effective from November 22, 2025, have brought changes to gratuity provisions. Gratuity, which is a financial benefit for long-term employees, now has specific eligibility conditions under the updated rules.

Key Changes in Gratuity Rules

Minimum service Requirement:

Previously, some employees could claim gratuity after one year of service in certain cases.

Under the new rules, employees must now complete a minimum of five years of continuous service with an organization to be eligible for gratuity.

Who Is Affected:

Employees in private companies, government-aided institutions, and other covered establishments.

Those who resign or are terminated before completing five years will not be eligible for gratuity.

Gratuity Calculation:

Gratuity is calculated based on:

Gratuity=Last Drawn Salary×15×Years of Service26\text{Gratuity} = \frac{\text{Last Drawn Salary} × 15 × \text{Years of Service}}{26}Gratuity=26Last Drawn Salary×15×Years of Service


  • This formula applies to employees who complete the minimum service period.
  • Objective of the Rule Change:
    • To standardize gratuity benefits and ensure long-term employee retention.
    • Encourages both employees and employers to focus on sustained service and organizational loyalty.
Conclusion

Employees should now be aware that gratuity will not be available after just one year of service. To claim this valuable post-employment benefit, individuals must complete five years of continuous service. Planning your career and understanding these rules will help maximize long-term financial benefits.

 

Disclaimer:

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.

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