Gratuity for Non-FTE Employees After One Year: Seeking Clarity on New Labour Codes

As per the new Labour codes, yet to be implemented, the FTE (Fixed Term Employees) will be entitled to gratuity after the completion of only one year of service. I would like to know whether non-FTE employees resigning after one year of service will be entitled to gratuity. My request to our esteemed readers is to clarify the above.

Dear Gopalnanda,

Gratuity eligibility under the Code on Social Security, 2020

Section 53(1) of the Code on Social Security, 2020 states that gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years.

Exceptions to the five-year rule

However, a clear and explicit departure has been made from this condition in respect of certain types of employees as follows:

1) The first proviso to sec.53(1) reduces this minimum qualifying service to three years in the case of working journalists falling under the Working Journalists and Other Newspaper Employees Act, 1955.

2) The sixth proviso to sec.53(1) provides that in the case of an employee employed on fixed-term employment or a deceased employee, the employer shall pay gratuity on a pro-rata basis.

In all the above cases, the continuous service for the purpose of gratuity under the Code shall be calculated as explained in sec.54 of the Code.

Therefore, non-FTE employees cannot have the relaxation from the minimum 5 years of qualifying service.

Power to Exempt Under the Gratuity Act

As per Section 5 of the Gratuity Act, the "Power to exempt" states that an establishment can be exempt from the payment of gratuity, provided employees are in receipt of gratuity or pensionary benefits not less favorable than the benefits conferred under this Act.

My question is: What are the pensionary benefits available that the company can provide to exempt from gratuity, and what is the procedure to obtain the exemption?