Am I eligible for gratuity? How is it calculated?
Simple answer
Usually after 5 years of continuous service. Fixed-term employees qualify after 1 year, on a pro rata basis. Gratuity = last monthly wages × 15/26 × completed years. The employer must pay within 30 days of it becoming due.
Real-life examples
Joseph worked 7 years and 8 months at a Kochi hotel. His last basic pay plus DA was ₹26,000. The extra 8 months count as a full year, so his gratuity is 26,000 × 15/26 × 8 = ₹1,20,000.
Meera was hired in Noida on a 1-year fixed-term contract and completed it, so she gets gratuity in proportion to her service. Her colleague Sanjay, a permanent employee, resigned after 4 years and 3 months, so he does not qualify.
What should you do?
- 1Count your continuous service. Breaks for sickness, accident, leave or lay-off usually still count.
- 2Work out your 'wages': basic pay plus DA. If excluded allowances are more than half your pay, the extra is added back.
- 3Apply to your employer in writing for gratuity, and update your nomination.
- 4If it isn't paid within 30 days, ask for interest and apply to the competent authority (labour office) named under the Code.
- 5If the employer forfeits or disputes it, talk to a lawyer or call NALSA at 15100.
Exceptions & limits
- No 5-year minimum if employment ends due to death or disablement. In case of death, gratuity goes to the nominee or legal heirs.
- Gratuity can be forfeited to the extent of damage you caused, or wholly or partly if you are terminated for violent or disorderly conduct or an offence of moral turpitude at work.
- The law covers factories, mines, plantations and shops or establishments with 10+ employees, not government staff under their own rules. Payout is capped (currently ₹20 lakh) unless your contract gives more.
Official legal reference
Code on Social Security, 2020 — Section 53
Gratuity after 5 years' continuous service (not needed on death, disablement or end of fixed term); 15 days' wages per year; ceiling notified by Centre.
Earlier: Payment of Gratuity Act, 1972, Section 4Read the official textIndustrial Relations Code, 2020 — Section 2(o)
Fixed-term employees get the same pay and benefits as permanent staff, and are eligible for gratuity after one year under the contract.
Code on Social Security, 2020 — Section 54
What counts as continuous service, including working at least 240 days in the previous 12 months.
Earlier: Payment of Gratuity Act, 1972, Section 2ARead the official textCode on Social Security, 2020 — Section 56
Employer must pay within 30 days; delay attracts simple interest; disputes go to the competent authority.
Earlier: Payment of Gratuity Act, 1972, Section 7Read the official textCode on Social Security, 2020 — Section 2(88)
'Wages' means basic pay, DA and retaining allowance; excluded items above half of total pay are added back.
Where to get help
SAMADHAN (labour disputes)
File labour disputes like unpaid wages with the labour authorities.
NALSA Free Legal Aid
Free lawyer and legal advice for eligible people through Legal Services Authorities.
Source & status
- Applies to
- All of India
- Law in force since
- 21 Nov 2025
- Legal review
- Draft — awaiting lawyer review
Educational information, not legal advice for your case. Exact facts and the law that applies matter — speak to a lawyer before acting.