What changed for fixed-term contract workers in 2025
The new 1-year gratuity eligibility rule, and who it actually applies to.
Gratuity used to be effectively theoretical for most fixed-term contract employees — the same 5-year eligibility bar applied to everyone, and most fixed-term contracts simply never ran that long. A rule change in late 2025 carved out a much shorter window specifically for this group.
What changed, and why it matters for short contracts
Under the Code on Social Security, 2020, with rules notified effective 21 November 2025, fixed-term contract employees now qualify for gratuity after just 1 year of service, instead of the standard 5-year rule that still applies to everyone else. Before this, a 2-year fixed-term contract could end without a single rupee of gratuity, since it never reached the same bar a permanent employee had to clear.
Under the old universal 5-year rule: not eligible, ₹0 paid. Under the new 1-year fixed-term rule: eligible, ₹46,153.85paid — the same contract, the same formula, only the eligibility threshold has changed.
Estimate the gratuity payable to you based on tenure and last drawn pay.
Who the new 1-year window actually covers
This applies specifically to employees on a defined fixed-term contract — it doesn’t touch the 5-year rule for permanent, open-ended employees, who still need to clear the same bar as before. The shortest fixed-term contract that now qualifies is exactly 1 year; anything shorter still gets nothing, fixed-term or not.
Eligible under the new rule — ₹23,076.92 paid. A permanent employee at the identical 1-year tenure is still not eligible at all, since the standard 5-year rule is untouched by this reform.
The formula itself doesn’t change for fixed-term employees. It’s the same 15 days’ wages per year of service, divided by 26, that applies to any other Act-covered employee. The reform only moves the eligibility line, not the payout math.
What the reform left untouched
Two things this reform doesn’t touch: the ₹20 lakh statutory ceiling on the payout, covered in gratuity’s ₹20 lakh cap, explained, and the 5-year rule for everyone who isn’t on a fixed-term contract, covered in why gratuity isn’t part of your monthly salary. And since the rules took effect from a specific date, contracts that ended before 21 November 2025 aren’t covered retroactively — the new window only applies going forward from when it was notified.
All figures are indicative and for educational purposes only — not financial advice.
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