New Labour Laws Gratuity: Big Changes, 48-Hour Workweek, One-Year Eligibility, National Contractor License

The Centre on Friday announced the rollout of four new labour codes, merging 29 existing labour laws into a unified structure. The move marks one of the most significant changes to India's labour governance in decades, bringing revised rules for working hours, gratuity, work-from-home arrangements and social security coverage for gig and platform workers.

The government said the updated labour codes are designed to align the country's labour ecosystem with the changing dynamics of the modern workplace.

"By modernising labour regulations, enhancing workers' welfare and aligning the labour ecosystem with the evolving world of work, this landmark move lays the foundation for a future-ready workforce and stronger, resilient industries driving labour reforms for Aatmanirbhar Bharat," the official statement read.

What Is Gratuity?

Gratuity is a lump-sum financial benefit given by an employer to an employee as a gesture of appreciation for long-term service. Traditionally, employees became eligible for gratuity only after completing five years of continuous service, typically payable at the time of retirement, resignation, or termination.

What Are The New Rules For Gratuity Eligibility Under the New Labour Codes?

One of the most impactful changes introduced in the new labour codes relates to gratuity eligibility. Under previous rules defined by the Payment of Gratuity Act, fixed-term employees could claim gratuity only after completing five years of continuous employment. However, the new framework eases this requirement substantially.

Who Are Eligible For New Labour Gratuity Policy?

As per the provisions highlighted in the PIB release, fixed-term employees (FTEs) will now be eligible for gratuity after just one year of service. This move is intended to create parity between permanent workers and those hired on fixed-term contracts, ensuring equal access to salary structure, paid leave, medical benefits and social security coverage.

To make gratuity and other benefits more uniform, the codes also specify that 50% of the total remuneration- or any other percentage notified later- must be included while calculating "wages" for gratuity, PF, pension, and other social security benefits. The export sector's fixed-term workforce will also be entitled to gratuity, provident fund, and social security benefits under the new provisions.

Revised Work Hours and Overtime Rules

The new labour codes introduce updated rules on working hours. Businesses may now assign shifts ranging from 8 to 12 hours a day, provided the total weekly working hours do not exceed 48. The earlier limit capped daily work at 9 hours. Any work performed beyond standard hours must be compensated at twice the employee's regular wage rate, ensuring stronger protection of worker rights.

Single National Licence for Contractors

For contract-based employment, the codes simplify compliance by enabling contractors to obtain a single licence valid for five years and applicable throughout India. This replaces the previous system in which contractors had to secure multiple state-level licences, significantly reducing bureaucratic delays and improving ease of doing business.

Gig and Platform Workers Get Formal Recognition

In a first, the labour codes formally define gig and platform workers- such as app-based drivers, delivery partners, and freelancers- and extend social security provisions to them. This marks a transformative step in acknowledging India's rapidly growing digital and platform-based workforce, which previously operated outside the purview of traditional labour laws.

Work-From-Home Provision Included

Recognising evolving workplace trends, the codes introduce a provision that allows work-from-home arrangements in the services sector. These agreements will operate based on mutual consent between employers and employees, offering greater flexibility and aligning with post-pandemic work patterns.