Gratuity After 1 Year of Service (Fixed-Term Employees)
By Varun M
Under the Code on Social Security, 2020, fixed-term employees qualify for gratuity after just 1 year of service — down from the 5-year requirement that still applies to permanent employees. Here's exactly where that 12-month line falls.
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The short answer
If you're a fixed-term employee with 12 or more completed months of service, you're eligible for gratuity. Below 12 months, you're not — there's no partial credit for almost reaching a year.
The 12-month line, exactly
Take a fixed-term employee earning ₹18,000/month in wages (Basic + DA):
| Service | Eligible? | Gratuity |
|---|---|---|
| 11 months | No | ₹0 |
| 12 months (1 year) | Yes | ₹10,384.62 |
At 12 months: (₹18,000 × 15 × 1) ÷ 26 = ₹10,384.62. One month earlier, at 11 months, the same employee gets nothing — not a reduced amount, nothing. Eligibility is a hard cutoff at 12 completed months, not a sliding scale.
Don't confuse this with the rounding rule
A separate rule says a period of service more than six months past a completed year counts as a full extra year, for calculating your payout once you're already eligible. That rounding rule doesn't lower the 12-month eligibility threshold itself — see gratuity eligibility rules in India for why this distinction matters.
How the 50% wage rule affects fixed-term gratuity
Fixed-term employees' gratuity base is affected by the same 50% wage rule as permanent employees' — if your Basic + DA is below 50% of your total pay, your gratuity wage base gets topped up. See the gratuity formula (15/26) explained and the 50% wage rule explained for the mechanics.
FAQ
Yes — under the Code on Social Security, 2020, fixed-term employees are eligible for gratuity after 1 year of service, down from the 5-year requirement that still applies to permanent employees.
12 completed months of service. Eligibility is based on your actual months of service, not a rounded figure — 11 months and 29 days does not qualify, even though it's very close to a year.
You wouldn't be eligible for gratuity under the fixed-term provision — the 12-month threshold applies to actual completed service, with no partial credit below it.
The 1-year fixed-term provision is specifically for fixed-term employment as defined under the Code on Social Security, 2020 — coverage for other contract categories may differ and should be confirmed against the final Central Rules once notified.
Yes — the same wage-floor calculation applies to fixed-term employees' gratuity base as to permanent employees'. See the 50% wage rule explained for the mechanics.
Last verified: 11 Aug 2026
Sources: Code on Social Security, 2020; Code on Wages, 2019.
This is an indicative estimate based on the gratuity formula and eligibility rules under the Code on Social Security, 2020, as understood at the time of writing. The completed-years rounding rule and the final Central Rules were not fully confirmed as of this verification date. Confirm your exact entitlement with your employer's HR/payroll team or a qualified professional before relying on this for financial decisions.