If you’ve ever looked at your salary breakup and wondered why your gratuity barely moves despite years of work, things are about to get interesting. The New Labour Law 2025 gratuity calculator is rewriting how companies compute employer benefits — and many employees will walk away with noticeably higher payouts.
Here’s the big twist: from November 21, 2025, the way “wages” are defined has changed. And because gratuity is calculated on wages, not total CTC, millions of salaried employees are about to see a jump in their gratuity amount.
Why everyone is suddenly talking about this law
The amended labour code introduces two meaningful changes:
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Fixed-term employees can now earn gratuity after just one year, whereas permanent employees still need five years of continuous service.
Wages must form at least 50% of total remuneration, meaning allowances can’t be inflated to reduce the basic salary anymore.
Think about it: for years, many companies kept basic pay low and made up the rest with allowances. Now, if allowances are more than 50% of total compensation, the extra amount has to be added back to the basic. That instantly increases the wage figure used for gratuity, PF, and other benefits.
Honestly, this is one of the biggest employee-friendly shifts in decades.
How the New Labour Law 2025 Gratuity Calculator Actually Works
Let’s break it down in simple terms:
Old system
Gratuity = 15 / 26 × (Basic Salary × Number of Years of Service)
New system
Gratuity = 15 / 26 × (Wages × Number of Years of Service)
Where Wages = Basic + DA + Retaining Allowance + Excess Allowances (above 50% of total CTC)
So if your allowances were previously inflated to reduce benefits, your gratuity is finally getting corrected.
Gratuity Comparison at CTC of ₹6 Lakh, ₹12 Lakh & ₹24 Lakh
The table below shows how gratuity changes when the 50% wage rule kicks in:
| Annual CTC | Gratuity Under Existing Rules | Gratuity Under New 2025 Rules | Increase |
|---|---|---|---|
| ₹6,00,000 | ₹14,430 | ₹19,000 | ↑ ₹4,570 |
| ₹12,00,000 | ₹28,860 | ₹37,999 | ↑ ₹9,139 |
| ₹24,00,000 | ₹57,720 | ₹75,998 | ↑ ₹18,278 |
You’d be surprised how many employees don’t even realize they’re entitled to gratuity. For someone working 15–25 years, the difference above can turn into lakhs of extra money at retirement or exit.
Will this apply to your previous years of service?
Right now, this is the hottest question.
Because the new rule applies from November 21, 2025, there’s uncertainty about whether:
- Your entire job tenure will be recalculated using the new “50% wages” rule, or
- Only the period after November 21, 2025 will follow the new rule
Experts expect clarity soon, but early signals indicate that calculation may be split between the old and new regimes for employees who worked across both periods.
Fixed-Term vs Permanent Employees: Who benefits more?
Fixed-term employees (contractual staff) are the biggest winners. For the first time:
✔ They can receive gratuity after just 1 year of service
✔ Even if their contract ends before completing 5 years
Permanent employees must still complete 5 years, but once eligible, their gratuity will also be calculated using the updated wage structure.
If you’re on contract and earn a decent CTC, this is a game-changer.
What this means for you
Whether you’re mid-career or nearing retirement, this law puts more money in your pocket. And if your employer restructures your salary to reduce allowances and increase basic — that’s not a bad thing anymore. It lifts your long-term benefits, not just your take-home.
If your company hasn’t restructured salaries yet, there’s a good chance it’s happening soon.
Frequently Asked Questions
1. Does the New Labour Law 2025 gratuity calculator guarantee higher payouts?
In most cases, yes. Since allowances above 50% must be added back to wages, the base used for computing gratuity increases, which directly pushes up gratuity.
2. Do fixed-term employees still need five years of service to get gratuity?
No. Under the updated rules, they are eligible after one year, even if their contract ends before five years.
3. Will gratuity be recalculated for all previous years of service before November 21, 2025?
This is still waiting for formal clarification. Many experts expect a split calculation — part under old rules, part under new — for employees who span both timelines.
