Gratuity Eligibility in India 2026
Who Qualifies — 5 Year Rule vs New 1 Year Rule
Under the old Payment of Gratuity Act 1972, you needed 5 continuous years to qualify. Under the new Labour Code (effective November 21, 2025), just 1 year is enough. This guide covers every eligibility scenario — resignation, termination, retirement, and more.
Old Law
Payment of Gratuity Act 1972
New Labour Code ✅
Social Security Code 2020
✅ Quick Eligibility Checklist
Go through these 5 checks in order to determine if you qualify for gratuity.
Do you work in an establishment with 10 or more employees?
If YES
Continue to next check
If NO
Gratuity Act may not apply — but check state-specific rules
Have you completed minimum continuous service? (5 years — old law / 1 year — new Labour Code)
If YES
Continue to next check
If NO
Not eligible unless leaving due to death or disablement
Are you leaving due to resignation, retirement, termination, death, or disablement?
If YES
Eligible for gratuity
If NO
Gratuity is only triggered on separation from the employer
Were you terminated for proven violent misconduct?
If YES
Employer may legally forfeit gratuity — legal process required
If NO
Gratuity must be paid within 30 days of leaving
Are you a contract / fixed-term employee?
If YES
Eligible under new Labour Code on contract completion (1 year minimum)
If NO
Standard eligibility rules apply
Eligibility by Years of Service — Old Law vs New Labour Code
| Years of Service | Old Law (Payment of Gratuity Act 1972) | New Labour Code (Social Security Code 2020) |
|---|---|---|
| Less than 1 year | ❌ Not eligible | ❌ Not eligible |
| 1 year to < 5 years | ❌ Not eligible | ✅ Eligible (new rule) |
| Exactly 5 years | ✅ Eligible | ✅ Eligible |
| 5 years 4 months | ✅ 5 years counted | ✅ 5 years counted |
| 5 years 7 months | ✅ 6 years counted | ✅ 6 years counted |
| 10 years | ✅ Eligible | ✅ Eligible |
| Death / Disablement | ✅ Always eligible | ✅ Always eligible |
| Fixed-term contract end | ⚠️ Case-by-case | ✅ Explicitly eligible |
💡 The biggest change: employees serving 1–4 years who were previously ineligible are now protected under the new Labour Code. This especially benefits employees in high-attrition industries like IT, startups, and BPO.
Every Separation Scenario — Are You Eligible?
Resignation (Normal)
Old Law — 1972 Act
✅ Eligible
Minimum 5 years continuous service required
New Labour Code 2025
✅ Eligible
Minimum 1 year continuous service required ✅
Note: Most common scenario. Under old law, employees resigning before 5 years forfeit gratuity entirely.
Retirement / Superannuation
Old Law — 1972 Act
✅ Eligible
Eligible regardless of years if reached retirement age
New Labour Code 2025
✅ Eligible
Same — eligible on retirement ✅
Note: Always eligible on retirement. Years of service determine the payout amount.
Death of Employee
Old Law — 1972 Act
✅ Eligible
Eligible with no minimum service period. Paid to nominee.
New Labour Code 2025
✅ Eligible
Same — paid to nominee. No minimum period. ✅
Note: Gratuity is paid to the nominated family member. No minimum service requirement applies.
Permanent Disablement
Old Law — 1972 Act
✅ Eligible
Eligible with no minimum service period
New Labour Code 2025
✅ Eligible
Same — no minimum period required ✅
Note: Due to accident or disease. Gratuity is paid in full regardless of years served.
Termination (Without Misconduct)
Old Law — 1972 Act
✅ Eligible
Eligible if 5+ years of service completed
New Labour Code 2025
✅ Eligible
1 year sufficient under new code ✅
Note: Retrenchment, layoff, or redundancy — gratuity must be paid if minimum service is met.
Termination (Proven Misconduct)
Old Law — 1972 Act
❌ Not Eligible
Employer may forfeit gratuity — needs legal process
New Labour Code 2025
❌ Not Eligible
Same — employer may forfeit after due process
Note: Violent or disruptive misconduct that causes damage — employer can legally forfeit gratuity.
Fixed-Term Contract End
Old Law — 1972 Act
❌ Not Eligible
Not specifically covered — varies by case
New Labour Code 2025
✅ Eligible
Specifically eligible under Social Security Code 2020 ✅
Note: New Labour Code explicitly covers fixed-term contract workers completing their contract term.
Resignation Before Minimum Service
Old Law — 1972 Act
❌ Not Eligible
Not eligible — less than 5 years = no gratuity
New Labour Code 2025
❌ Not Eligible
Not eligible — less than 1 year = no gratuity
Note: Only the minimum threshold changes — below it, no gratuity in either law.
Who Is NOT Eligible for Gratuity in India
Employees in establishments with fewer than 10 workers
The Payment of Gratuity Act 1972 applies to establishments with 10 or more employees. Smaller establishments are not covered by statute — though some states have separate rules.
⚠️ Exception / Note: Some states extend gratuity to smaller establishments. Check state-specific rules.
Employees who resign before minimum service (below 1 year)
Under both old and new law, leaving before the minimum threshold means no gratuity entitlement. Under the new Labour Code the threshold is 1 year.
⚠️ Exception / Note: No exception unless death or disablement.
Employees dismissed for violent/serious misconduct
An employer can legally forfeit gratuity if an employee is dismissed for an act of violence, damage to property, or other serious offences proven through due process.
⚠️ Exception / Note: Forfeiture must follow due process — employee must be given a chance to explain.
Apprentices and trainees
Apprentices under the Apprentices Act 1961 are not covered under the Payment of Gratuity Act. Their apprenticeship period does not count toward gratuity service.
⚠️ Exception / Note: If the apprentice is subsequently hired as a regular employee, their service starts from the date of regular employment.
🏛️ Special Case: Is 4 Years 8 Months Eligible for Gratuity?
This is one of the most searched questions around gratuity eligibility. Here is the complete answer:
Under Old Payment of Gratuity Act 1972
Strictly, 4 years 8 months does NOT qualify — the law requires 5 years. However, the Supreme Court of India in Mettur Beardsell Ltd. vs Regional Labour Commissioner held that if an employee works 240 days in the 5th year, that year counts as a complete year — making them eligible. In a 6-day working week, 240 days ≈ 8 months. So in practice, 4 years 8+ months may be treated as 5 years by courts.
Under New Labour Code 2025
4 years 8 months easily qualifies — the threshold is now just 1 year of continuous service. This ambiguity is completely resolved under the new code.
Know your eligibility — calculate your payout
Enter Basic salary and years of service → get exact gratuity amount. Free tool, no login.
Frequently Asked Questions
Who is eligible for gratuity in India?▼
An employee is eligible if they have completed minimum continuous service (5 years under old law, 1 year under new Labour Code 2025), work in an establishment with 10+ employees, and are separating due to resignation, retirement, termination, death, or disablement. Contract and fixed-term employees are also explicitly covered under the new Labour Code.
Is gratuity payable if I resign before 5 years?▼
Under the old Payment of Gratuity Act 1972 — No, not eligible before 5 years. Under the new Labour Code (Social Security Code 2020, effective November 21, 2025) — Yes, eligible after just 1 year of continuous service. So if you resign after 1–4 years under the new code, you are entitled to gratuity.
Is 4 years 8 months eligible for gratuity in India?▼
Under old law — borderline. Strictly no, but the Supreme Court has held that working 240 days in the 5th year can qualify. Under the new Labour Code — clearly yes, as only 1 year is required.
Is gratuity payable on termination in India?▼
Yes, if minimum service is completed and termination is not due to proven violent misconduct. Under old law 5 years required; under new Labour Code only 1 year. Employers cannot deny gratuity on retrenchment, layoff, or redundancy if minimum service is completed.
Does gratuity apply to contract employees?▼
Yes. Under the new Labour Code, fixed-term contract employees who complete their contract term are explicitly entitled to gratuity — even without completing 5 years. Under old law this was unclear and handled case-by-case. Regular contract workers follow the same 5-year (old) or 1-year (new) rule.