How the New Labour Code Changes Your Gratuity Calculation
By Varun M
The new labour code doesn't touch the gratuity formula itself — it changes the wages figure that formula runs on. Since gratuity has no ceiling like PF does, that change can meaningfully raise your gratuity, even without a promotion or raise.
Gratuity Calculator
See your gratuity, as structured and with the wage rule applied.
The short answer
Gratuity = (wages × 15 × completed years) ÷ 26 — unchanged. What changes is "wages": if your Basic + DA is below 50% of your total remuneration, it's topped up to that 50% floor before the formula runs, which raises your gratuity base directly.
How it's calculated
A permanent employee on a ₹15,00,000 annual CTC (₹1,25,000/month), with Basic + DA structured at 25% of CTC (₹31,250/month), after 6 years of service:
| As structured | With 50% wage rule | |
|---|---|---|
| Wage base | ₹31,250 | ₹62,500 |
| Gratuity (6 completed years) | ₹1,08,173.08 | ₹2,16,346.15 |
The wage base exactly doubled (₹31,250 → ₹62,500, since 50% of ₹1,25,000 is ₹62,500), so the gratuity amount exactly doubled too — the formula scales linearly with the wage figure. This is why gratuity is usually the biggest single number affected by the new labour code, bigger in proportion than the change to PF or take-home for most people.
Why gratuity moves more than PF
PF is capped at a ₹15,000/month wage base, so raising your statutory wages further often doesn't raise PF at all once you're past that ceiling. Gratuity has no equivalent cap — it scales with your full wage figure, however high the 50% floor pushes it. See the new wage code PF impact for the PF side of this.
The formula itself, and eligibility
For why the formula uses 15 and 26 specifically, see the gratuity formula (15/26) explained. For who qualifies and when, see gratuity eligibility rules in India.
FAQ
No — the formula itself (wages × 15 × completed years ÷ 26) is unchanged. What changes is the wages figure that formula uses: the new 50% wage rule can raise your statutory wage base, which flows straight through to a higher gratuity amount.
That's simply how the two calculations work under current rules — PF has a statutory wage ceiling (₹15,000/month) that caps the contribution; gratuity's formula has no equivalent cap, so it scales directly with your full wage figure.
This calculator estimates your gratuity based on current wages and service — it doesn't address how any transition or past accrual is treated, which is a compliance question for your employer's HR/payroll team.
Your accrued gratuity liability is generally tracked on an ongoing basis by your employer, but you're only paid out on eligible separation. Use this calculator for an indicative current-day estimate, not a guarantee of the exact future payout.
Enter your wages, service period, and (optionally) your CTC into the Gratuity Calculator — it shows your gratuity both as currently structured and with the 50% wage rule applied.
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 wage rules 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.