How Companies are Adapting to the New Wage Code 2025 Without Past Gratuity Deductions for Regular Employees

I am interested in understanding how companies that have not deducted the gratuity until now are adapting to the New Wage Code 2025 for regular employees. We have not included gratuity as a component in the past.

Understanding the New Wage Code 2025 and Gratuity

Based on your query, I understand that your company has not been deducting gratuity till now. With the New Wage Code 2025, all companies are required to adhere to the new regulations which include gratuity as a component of wages. Here's how you can manage this transition:

1. Understand the New Wage Code: The new wage code 2025 consolidates and simplifies several labor laws, including those related to gratuity. It's important to understand these changes. You can find the detailed wage code on the official government website https://www.labour.nic.in.

2. Gratuity Calculation: Gratuity is calculated as (Basic + DA) * 15/26 * Number of Years of Service. You can use this formula to calculate the gratuity for each employee.

3. Implement Changes in Payroll: Once you have calculated the gratuity, you need to include it in the payroll. This will require changes in your payroll software or process.

4. Communicate with Employees: Inform your employees about the changes. Explain why these changes are being made and how it affects their salary. You can hold a meeting or send an email to communicate these changes.

5. Seek Legal Advice: If you are unsure about any aspect of the new wage code, it's always a good idea to seek legal advice. You can consult with a labor law expert or a HR consultancy to ensure that you are complying with all the regulations.

Remember, not complying with the new wage code can result in penalties. So, it's important to take action as soon as possible. Hope this helps! 👍

Dear Deepa Madhikar,
The Gratuity is as the EPF contribution@12% made by the employer/Company.
Similarly, no deduction is done for the gratuity from the employee.
The quantum of gratuity is a part of CTC.Therefore, the gratuity is an undisclosed part of wage neither deducted but paid on eligibility of five years continuous working.
Therefore, no problem is existing to until adapt the New Wage Code 2025 for regular employees.
The Payment of Gratuity Act applies to establishments with 10 or more employees and covering factories, mines, oilfields, plantations, ports, railways, companies, and notified shops/establishments, ensuring employees with 5+ years of service (or less in case of death/disablement) receive gratuity prior to wages code.
You have misunderstood, gratuity has always remained a component in the wages.