# India’s New Gratuity Rules from Nov 21, 2025: What Employees & Employers Must Know

URL: https://technosports.co.in/indias-new-gratuity-rules-from-nov-21-2025-what-employees/  
Published: 2026-01-01  
Updated: 2026-01-01  
Author: Reetam Bodhak

India’s **new labour laws**, effective **from November 21, 2025**, have brought major changes to employee benefits — especially **gratuity**. Under guidance from the **Institute of Chartered Accountants of India (ICAI)**, employees leaving their jobs on or after this date are **entitled to revised gratuity payouts**, and companies must account for these changes *immediately* in their financial statements.

Whether you’re an employee planning a career move or an employer updating compliance, this compact guide explains the key changes in a clear, easy-to-read format.

## India’s Gratuity at a Glance: Old vs New Rules

| **Aspect** | **Old Gratuity Rules** | **New Labour Code Rules (Post Nov 21, 2025)** |
| --- | --- | --- |
| **Eligible Law** | Payment of Gratuity Act, 1972 | New Labour Codes consolidate old laws. [Wikipedia](https://en.wikipedia.org/wiki/The_Code_on_Social_Security%2C_2020?utm_source=chatgpt.com) |
| **Effective Date** | N/A | November 21, 2025 |
| **Gratuity Payable** | Based on last drawn wages (basic + DA). [Wikipedia](https://en.wikipedia.org/wiki/The_Payment_of_Gratuity_Act%2C_1972?utm_source=chatgpt.com) | Still based on last drawn wages but with **expanded wage definition** and broader coverage. [https://www.taxmann.com](https://www.taxmann.com/post/blog/icai-asb-issues-faq-on-accounting-impact-of-new-labour-codes?utm_source=chatgpt.com) |
| **Accounting Requirement** | Accrual per old standards | Must **recognise higher gratuity liability in Dec-quarter 2025 accounts**; *cannot defer*. [The Financial Express](https://www.financialexpress.com/money/employees-leaving-after-nov-21-2025-must-be-paid-revised-gratuity-under-new-labour-laws-says-icai-4092589/?utm_source=chatgpt.com) |
| **Employee Eligibility** | Usually after 5 years service | Includes enhanced benefits; fixed-term and contract workers get **pro-rata gratuity**. [Abcaus](https://abcaus.in/icai/icai-issues-faqs-key-accounting-implications-arising-from-new-labour-codes.html?utm_source=chatgpt.com) |

## 🔎 What’s Changed Under the New Labour Laws?

### 🧑‍💼 Gratuity Eligibility Expanded

Under the earlier **Payment of Gratuity Act, 1972**, gratuity was payable if an employee worked continuously for five years. [Wikipedia](https://en.wikipedia.org/wiki/The_Payment_of_Gratuity_Act%2C_1972?utm_source=chatgpt.com) The new Labour Codes broaden criteria — especially for **fixed-term and contract workers**, who now qualify for gratuity on a **pro-rata basis even before five years** of service.

![India](https://technosports.co.in/wp-content/uploads/2026/01/image-60-1024x576.png)

### 📈 Broader Definition of Wages

The definition of “wages” now includes components (like dearness allowance and certain allowances) that together make up at least 50% of total remuneration. That means **gratuity payouts may increase**, since they are calculated on a broader wage base. [Abcaus](https://abcaus.in/icai/icai-issues-faqs-key-accounting-implications-arising-from-new-labour-codes.html?utm_source=chatgpt.com)

### 📅 Immediate Accounting Recognition

As per ICAI guidance, companies must **account for the increased gratuity liability in their financial results for the quarter ending Dec 31, 2025**. They *cannot* push this cost to the next financial year even if supporting state rules are pending.

## 🧠 Why This Matters

- 🧑‍💼 **Employees Benefit:** Greater coverage and possibly higher gratuity payouts for many workers, especially fixed-term and contract staff. [Abcaus](https://abcaus.in/icai/icai-issues-faqs-key-accounting-implications-arising-from-new-labour-codes.html?utm_source=chatgpt.com)
- 🏢 **Employers Must Adjust Accounting:** Firms must update their salary and benefits accounting to reflect increased gratuity liabilities immediately. [https://www.taxmann.com](https://www.taxmann.com/post/blog/icai-asb-issues-faq-on-accounting-impact-of-new-labour-codes?utm_source=chatgpt.com)
- 📊 **Financial Reporting Impact:** Businesses may report higher employee-related costs in their Dec-quarter results due to these changes. [SFC Today](https://sfctoday.com/news/new-labour-codes-icai-flags-december-quarter-cost-impact-for-companies?utm_source=chatgpt.com)

[India’s First Vande Bharat Sleeper Train Launched on Kolkata–Guwahati Route — A New Era in Rail Travel](https://technosports.co.in/indias-first-vande-bharat-sleeper-train-kolkataguwahati/)

## ❓FAQs

### **Q1. Do employees leaving after Nov 21, 2025 get more gratuity?**

  
Yes — under the new codes, employees leaving on or after Nov 21 must be paid gratuity based on the **expanded definition of wages**, and fixed-term workers may benefit sooner.

### **Q2. Can companies delay recognising increased gratuity costs?**

  
No — ICAI has clarified that **higher gratuity liability must be recognised in the Dec 2025 financial results** and cannot be deferred to later periods.