- By Shubham Bajpai
- Sat, 22 Nov 2025 03:08 PM (IST)
- Source:JND
New Gratuity, PF Rules: The government of India has implemented four comprehensive labour laws, consolidating twenty-nine fragmented laws. The new four laws are the Code on Wages (2019), the Occupational Safety, Health and Working Conditions Code (2020), the Code on Social Security (2020), and the Industrial Relations Code (2020).
The new laws aim to simplify compliance for businesses while ensuring justified wages and social security for India's workforce.
The law also extended social security to gig workers and platform workers. One of the biggest changes that will affect a major portion of the strong 50 crore workforce is the definition of "wages", and provisions on gratuity.
The wages have been defined under the 'Code of Wages'. According to the new definition, the excluded component of the salary, like House Rent Allowance (HRA), overtime, conveyance, etc, can not exceed 50 per cent of the employees' cost to company (CTC).
Effect on PF
The definition of wage will affect the Provident Fund (PF). For the employees with a comparatively small Basic Pay, the CTC is likely to see an increase.
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As the employer and employee both have to contribute 12 per cent each to the PF, the total amount based on the new rule will rise. However, it will also mean a higher payout for both employees and their employers.
Effect on Gratuity for FTEs
So far, the Fixed Term Employees (FTEs) were entitled to get a gratuity amount after a service of five years under the Code on Social Security.
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As per the new laws, the eligibility for the Fixed-Term Employees (FTEs) to qualify for gratuity after separation has been reduced from five years to one year.
Moreover, according to the new definition of Wage, the higher basic pay means the final gratuity payout would be higher for a major section of the formal workforce.