I have 2 questions which are related to implementation of the Labor Code 2020.
1. What is the criteria of number of continuous service for the purpose of payment of Gratuity?
2. What is the ESI salary now?
The salary of an employee is given below-
Basic-6500.00
HRA-3250.00
Conveyance-1625.00
Spl. Allowance-1625.00
Fixed Gross-13000.00
Incentive-56479.00
Gross-69479.00
i) Will he get ESI coverage?
ii) In the above case what will be the calculation of ESI in case he is covered by ESI?
I request you to share the answer to my questions above, little confused after the amendment w.e.f 21.11.2025.
Withe Regards
Subhabrata Dasgupta
From United+States, Chicago
Acknowledge(0)
Amend(0)
41. What is the criteria of number of continuous service for the purpose of payment of Gratuity?
2. What is the ESI salary now?
The salary of an employee is given below-
Basic-6500.00
HRA-3250.00
Conveyance-1625.00
Spl. Allowance-1625.00
Fixed Gross-13000.00
Incentive-56479.00
Gross-69479.00
i) Will he get ESI coverage?
ii) In the above case what will be the calculation of ESI in case he is covered by ESI?
I request you to share the answer to my questions above, little confused after the amendment w.e.f 21.11.2025.
Withe Regards
Subhabrata Dasgupta
From United+States, Chicago
Acknowledge(0)Amend(0)
The Labor Code 2020 has indeed brought some changes to the criteria for gratuity payment and the calculation of ESI. Let's break it down:
Gratuity Payment Criteria
The gratuity is a benefit provided to an employee for his/her services rendered to the organization. As per the Payment of Gratuity Act, 1972, an employee is eligible for gratuity if he/she has completed five years of continuous service in the same organization. The Labor Code 2020 has not made any changes to this criterion.
ESI Salary and Coverage
The Employees' State Insurance (ESI) is a self-financing social security and health insurance scheme for Indian workers. The ESI Act, 1948, applies to organizations with 10 or more employees. The wage limit for coverage under the Act is Rs. 21,000 per month. In your case, the gross salary of the employee exceeds this limit, so he/she would not be eligible for ESI coverage.
ESI Calculation
If an employee is covered under ESI, the contribution is 4.75% from the employer and 1.75% from the employee, calculated on the gross salary. However, in your case, as the employee is not eligible for ESI coverage, there will be no ESI calculation.
Additional Tips
It's important to regularly review the salary structures and benefits of your employees to ensure compliance with the latest labor laws. Non-compliance can lead to penalties and legal issues.
What to Avoid
Avoid making assumptions about the applicability of labor laws based on hearsay or outdated information. Always refer to the latest amendments and notifications from the government.
I hope this clarifies your doubts. If you have any more questions, feel free to ask.
From India, Gurugram
Acknowledge(0)Amend(0)
Gratuity Payment Criteria
The gratuity is a benefit provided to an employee for his/her services rendered to the organization. As per the Payment of Gratuity Act, 1972, an employee is eligible for gratuity if he/she has completed five years of continuous service in the same organization. The Labor Code 2020 has not made any changes to this criterion.
ESI Salary and Coverage
The Employees' State Insurance (ESI) is a self-financing social security and health insurance scheme for Indian workers. The ESI Act, 1948, applies to organizations with 10 or more employees. The wage limit for coverage under the Act is Rs. 21,000 per month. In your case, the gross salary of the employee exceeds this limit, so he/she would not be eligible for ESI coverage.
ESI Calculation
If an employee is covered under ESI, the contribution is 4.75% from the employer and 1.75% from the employee, calculated on the gross salary. However, in your case, as the employee is not eligible for ESI coverage, there will be no ESI calculation.
Additional Tips
It's important to regularly review the salary structures and benefits of your employees to ensure compliance with the latest labor laws. Non-compliance can lead to penalties and legal issues.
What to Avoid
Avoid making assumptions about the applicability of labor laws based on hearsay or outdated information. Always refer to the latest amendments and notifications from the government.
I hope this clarifies your doubts. If you have any more questions, feel free to ask.
From India, Gurugram
Acknowledge(0)Amend(0)
Dear Subhabrata,
For your understanding, I have detailed the implementation criteria for gratuity payment and ESI salary calculation under the Labor Code 2020.
1) Gratuity Eligibility:
- Fixed-term/Contract employees: These employees are eligible for gratuity after completing 1 year of service, provided the contract has a specified end date.
- Permanent employees: They become eligible for gratuity after completing 5 years of continuous service.
Here is an example for clarity:
Suppose an employee is on a fixed-term contract and completes 1 year, then the employer is obliged to pay gratuity. However, if the employee is permanent, gratuity is payable only after five years of service.
Employee Type Minimum Service for Gratuity
Fixed-term/Contract 1 year
Permanent 5 years
2) ESI (Employee State Insurance) Eligibility:
Under the new Labor Codes, an employee is eligible if the monthly wages are less than or equal to ₹21,000. The employer\'s contribution is 3.25% of total wages, while the employee\'s contribution is 0.75% of total wages.
Here\'s a practical example:
Suppose Basic Salary is ₹6,500, and DA is ₹0. The total wages then amount to ₹6,500.
Eligibility Check:
₹6,500 ≤ ₹21,000 → Yes, the employee is eligible for ESI.
The Employee\'s Contribution would be calculated as follows: 6500 x 0.75% = 6500 x 0.0075 = ₹48.75.
Below is a clear summary:
Component Amount (₹)
Total Wages 6,500
ESI Employer (3.25%) 211.25
ESI Employee (0.75%) 48.75
Thanks and regards,
Y. Satish
Acknowledge(0)Amend(0)
0
0
For your understanding, I have detailed the implementation criteria for gratuity payment and ESI salary calculation under the Labor Code 2020.
1) Gratuity Eligibility:
- Fixed-term/Contract employees: These employees are eligible for gratuity after completing 1 year of service, provided the contract has a specified end date.
- Permanent employees: They become eligible for gratuity after completing 5 years of continuous service.
Here is an example for clarity:
Suppose an employee is on a fixed-term contract and completes 1 year, then the employer is obliged to pay gratuity. However, if the employee is permanent, gratuity is payable only after five years of service.
Employee Type Minimum Service for Gratuity
Fixed-term/Contract 1 year
Permanent 5 years
2) ESI (Employee State Insurance) Eligibility:
Under the new Labor Codes, an employee is eligible if the monthly wages are less than or equal to ₹21,000. The employer\'s contribution is 3.25% of total wages, while the employee\'s contribution is 0.75% of total wages.
Here\'s a practical example:
Suppose Basic Salary is ₹6,500, and DA is ₹0. The total wages then amount to ₹6,500.
Eligibility Check:
₹6,500 ≤ ₹21,000 → Yes, the employee is eligible for ESI.
The Employee\'s Contribution would be calculated as follows: 6500 x 0.75% = 6500 x 0.0075 = ₹48.75.
Below is a clear summary:
Component Amount (₹)
Total Wages 6,500
ESI Employer (3.25%) 211.25
ESI Employee (0.75%) 48.75
Thanks and regards,
Y. Satish
Acknowledge(0)Amend(0)CiteHR.AI
(Fact Checked)-Your explanation on gratuity and ESI eligibility under the Labor Code 2020 is accurate and well-explained. Good job! (1 Acknowledge point)
0
0
There is no change in the qualifying salary or conditions for coverage under ESi or PF under the new Code. All the provisions relating to coverage are still available in the Code. Same is the case with gratuity also. For entitlement, one should have completed 5 years' service. One thing is that if there is any fixed term contract employee, and his service is not renewed on completion of the period for which he was appointed, then he will be entitled to get gratuity. This applies only to those who were appointed for a fixed term. This new provision does not apply to those who voluntarily leave.
From India, Kannur
Acknowledge(0)Amend(0)
0
0
From India, Kannur
Acknowledge(0)Amend(0)CiteHR.AI
(Fact Checked)-Your understanding of the Labor Code 2020 is accurate, especially regarding the gratuity entitlement and fixed term contract employees. Well done! (1 Acknowledge point)
0
0
CiteHR is an AI-augmented HR knowledge and collaboration platform, enabling HR professionals to solve real-world challenges, validate decisions, and stay ahead through collective intelligence and machine-enhanced guidance. Join Our Platform.
GRATUITY Calculation tool 2020.xlsx
Salary calculation.doc
Subhabrata Dasgupta
The % of ESI contribution for Employer and Employee are wrong.