New Labour Codes: 85% of Indian Workers Ineligible for Gratuity

New Labour Codes 2026: 85% of Indian Workers to Miss Out on Gratuity

So the rules of work in India are changing forever. On April 1, 2026, the new Labour Codes will be fully implemented across the country. The goal of these laws is to modernize social security and wages. In fact, a recent assessment by ICRA shows a surprising trend. Plus, it reveals that up to 85% of the total workforce will not be eligible for gratuity or leave encashment.

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The Reality of Gratuity Eligibility

But here is the main reason why so many people are excluded. India has a massive workforce of 560 million people. Is everyone covered by the new rules? No. Consequently, eligibility is limited to only 15-20% of workers. Moreover, this is because a huge portion of the population is self-employed or works in tiny shops. Previously, the law only applied to places with 10 or more staff. So, the new Social Security Code 2020 keeps this same threshold. Therefore, if you work for a small business, you likely won’t get these benefits.

Impact on Different Job Sectors

Still, the financial impact on big companies has been quite modest so far. The plan for most firms involves passing the extra costs to their clients. And, the IT and software sectors have seen the biggest changes. Accordingly, manpower-heavy industries are adjusting their budgets to handle one-time charges from early 2026.

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New Rules for Fixed-Term and Gig Workers

But there is some good news for certain types of employees. The reason for the update is to help those on short-term contracts. Why? Because fixed-term workers can now get gratuity after just one year of service. Essentially, this is a big drop from the five-year rule for permanent staff. Indeed, the new wage definition says that basic pay must be at least 50% of your total CTC.

Then there is the matter of gig and platform workers. The reason they are worried is that they are still excluded from gratuity. Worth noting: Even though they get some social security, they lack a formal “employer-employee” relationship. Ultimately, while the new codes bring more structure, the majority of India’s “informal” workers are still waiting for full protection.

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Frequently Asked Questions (FAQs)

When do the new Labour Codes start in India? So, while some companies started early, full implementation is set for April 1, 2026. Because of this, your salary structure might change in your next appraisal.

Will my take-home pay decrease? In fact, it might. Additionally, because basic pay must be 50% of your salary, your Provident Fund (PF) contribution will increase. This means higher savings but less cash in hand.

Can women work night shifts under the new code? But yes. Consequently, the new rules allow women to work at night, provided the employer gives proper security and transport.

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