Earning Rs 6–24 Lakh CTC? Here’s How The New 2025 Labour Law Boosts Your Gratuity Amount

From November 21, 2025, the new labour codes changed how gratuity is calculated in India. The biggest shift is the new wage definition, which requires at least 50 percent of an employee’s CTC to be counted as “wages.” If allowances exceed 50 percent, the excess must be added back to wages, resulting in a higher base for gratuity calculation.

Earlier, companies often kept basic pay low and increased allowances to reduce statutory payouts. The new rule prevents this by ensuring gratuity, PF, and other benefits reflect a fair portion of total compensation. This leads to more accurate and higher social security benefits for employees across income brackets.

The new formula significantly increases gratuity for many employees:

CTC Rs 6 lakh: Gratuity increases from ~Rs 14,430 to ~Rs 19,000.

CTC Rs 12 lakh: Gratuity rises from ~Rs 28,860 to ~Rs 37,999.

CTC Rs 24 lakh: Gratuity jumps from ~Rs 57,720 to ~Rs 75,998. These changes happen because the “wage” portion becomes larger under the 50 percent rule.

Under the new codes, even fixed-term and contract employees may be eligible for gratuity after just one year of service, compared to the previous five-year requirement. This expands social-security coverage for workers who previously received no long-term benefits.

The core gratuity formula remains the same: 15 days’ wages × years of service × (15/26) The statutory gratuity ceiling continues to be Rs 20 lakh. Any amount beyond this is treated as ex-gratia at the employer’s discretion.

Companies are now restructuring salary packages to comply with the 50 percent wage mandate. This may reduce take-home salary for some employees but increases long-term benefits such as PF and gratuity. Employers must now redesign salary structures to avoid non-compliance and ensure accurate statutory calculations.

To understand the impact of the new gratuity rules, employees should:

Review their revised salary structure

Check how much of their CTC counts as wages

Use a gratuity calculator with the new wage definition

Keep salary slips and wage details for future claims

Understand that while take-home pay may dip, retirement benefits grow significantly