The Biggest Change
Gratuity — New Wage Base and FTE Eligibility New
- Wage base change: Gratuity must now be computed on the effective wage — which is MAX(Basic+DA, 50% of CTC). The old practice of computing on suppressed basic pay is no longer compliant.
- FTE eligibility: Fixed-term employees are now eligible for pro-rata gratuity after just 1 year of service — down from 5 years. Payable on contract expiry.
- Rate unchanged: 15 days' wages per completed year of service, subject to the ₹20 lakh statutory ceiling.
- Gratuity must be paid within 30 days from the date it becomes payable. Delay attracts interest.
Before — Gratuity Act
Computed on Basic + DA only. 5-year eligibility for all employees including FTEs. FTEs rarely eligible in practice due to short contract durations.
Now — SS Code
Computed on MAX(Basic+DA, 50% of CTC). FTEs eligible after 1 year. Finance teams must provision for expanded FTE population and higher wage base. Applies from 21 Nov 2025.
Balance Sheet ImpactCompanies with large FTE populations and allowance-heavy salary structures face materially higher gratuity liabilities. HDFC Bank and TCS both disclosed significant provisions (₹800 crore and ₹2,128 crore respectively) for this change. Model your exposure and provision now.
Key Change
Gig and Platform Workers — Formal Recognition New
- Gig workers and platform workers are recognised under Indian law for the first time.
- Aggregators (ride-hailing, food delivery, e-commerce, logistics, freelance platforms) must contribute 1%–2% of annual turnover to designated social security funds for these workers.
- Contribution is capped at 5% of the total amount paid or payable to gig and platform workers.
- Central Government is the appropriate government for all gig and platform worker matters.
For Platform BusinessesModel your contribution liability now — it is based on annual turnover, not headcount. Classification risk is significant: the boundary between a gig worker and an employee carries major compliance implications. Engage legal counsel before rules are notified.
Provident Fund
EPF — Expanded Coverage
- Applies to all establishments with 20 or more employees.
- The old restriction to scheduled industries under the EPF Act has been removed. Coverage is now universal across all industries at 20+ employees.
- Employer contributes 10% of wages to the PF scheme. Employee contribution equal to employer's. Employer not required to match if employee voluntarily contributes beyond 10%.
- Three scheme types: Employees' Provident Fund Scheme, Employees' Pension Scheme, Employees' Deposit Linked Insurance Scheme.
Employees' State Insurance
ESI Coverage
- Applies to every establishment with 10 or more persons, except seasonal factories.
- Also applies to hazardous or life-threatening establishments — even with a single employee.
- Employer pays both employer's and employee's ESI contributions.
- Family definition for women employees now includes dependent parents-in-law (father-in-law and mother-in-law) subject to an income cap.
Maternity Benefit
26 Weeks and Crèche Obligation
- Eligible if the woman employee has worked at least 80 days in the preceding 12 months.
- Employer must grant 26 weeks of maternity benefit to eligible employees.
- Do not dismiss or discharge a woman absent on maternity leave.
- Pay a medical bonus of ₹3,500 to every eligible woman employee.
- Provide two nursing breaks (in addition to regular rest intervals) until the child reaches 15 months.
- Crèche facility mandatory at 50+ employees — can be shared or through common facilities. Applies to all types of establishments.
Employees' Compensation
Workplace Accident Coverage — Extended
- Employer must pay compensation if an employee suffers injury or death due to an accident arising out of and in the course of employment.
- Commuting accidents now covered: Accidents occurring while travelling between the place of residence and the workplace are treated as work-related.
- Where an employee dies or dependents are minors, the employer must deposit compensation with the competent authority.