Gratuity for IT and Software Employees
Yes — IT and software employees are covered by gratuity exactly like any other sector. There is no IT-industry exemption from gratuity, despite a persistent belief that there is. Here's where that belief actually comes from.
Gratuity Calculator
Same formula for IT employees as for every other sector — check your own numbers.
The short answer
Gratuity applies to every "shop or establishment" with 10 or more employees, under Chapter V of the Code on Social Security, 2020. An IT or software company is an "establishment" under the Code's own definition (Section 2(29): "a place where any industry, trade, business... or occupation is carried on") the same as a factory, a retail shop, or a consulting firm. There is no carve-out for the technology sector anywhere in the Code.
Where the "IT is exempt" idea comes from
It's not baseless — it's a real exemption, just for a different law than the one people assume. Several IT-hub states have separate IT/ITES facilitation policies that exempt technology companies from specific provisions of their state Shops and Establishments Acts: things like restrictions on women working night shifts, mandatory weekly-holiday scheduling, or the need for individual government permission to operate round-the-clock. Those exemptions are real, but they're about working conditions under state shops law — they don't touch the Code on Social Security, and they don't mention gratuity. "IT companies are exempt from labour law" gets rounded up from a narrow, real exemption into a much broader, false one.
A worked example
A software engineer at a 200-person IT company, ₹95,000/month in wages (Basic + DA), 6 years of continuous service:
gratuity = (₹95,000 × 15 × 6) ÷ 26 = ₹3,28,846.15
Same formula, same eligibility rule, same result you'd get calculating this for a factory worker or a retail employee on identical wages and service. See the gratuity formula (15/26) explained for why the formula looks the way it does.
What about small or early-stage tech companies?
The 10-employee threshold is what actually matters here, not the industry. A 9-person startup isn't yet covered. The moment headcount reaches 10 — on any single day, not as a sustained average — the company becomes a covered establishment. And coverage, once triggered, is sticky: if headcount later drops back below 10, the establishment remains covered. There's no way to opt back out by shrinking the team.
Does gratuity vary between IT hubs like Bangalore and Hyderabad?
No — gratuity is central legislation with no city-specific variation at all, in IT hubs or anywhere else. See gratuity in Mumbai, Bangalore, Delhi & Chennai if that's the question you're actually asking.
For who qualifies and when, see gratuity eligibility rules in India.
FAQ
No. Gratuity applies to every "shop or establishment" with 10 or more employees under the Code on Social Security, 2020, and an IT/software company clearly qualifies as an establishment under the Code's own definition. There is no sector-specific exemption for technology companies.
This usually comes from real, but much narrower, state IT/ITES policy exemptions — from provisions like night-shift restrictions or mandatory weekly-holiday scheduling under state Shops and Establishments Acts. Those don't touch gratuity or the Code on Social Security at all, but the exemption gets generalised into a false 'IT is exempt from labour law' belief.
Not yet — the 10-employee threshold is what matters, on any single day, not the industry. Once headcount reaches 10, the company becomes a covered establishment, and that coverage persists even if headcount later drops back below 10.
No — the same 15/26 formula, run on Basic + DA wages and completed years of service, applies regardless of industry.
No — gratuity has no city-specific variation either. See gratuity in Mumbai, Bangalore, Delhi & Chennai if that's the question.
Last verified: 19 Aug 2026
Sources: Code on Social Security, 2020, Chapter V (Sections 53–58), Section 2(29) (definition of "establishment"), and Section 1(8) (continued applicability once coverage is triggered), read directly for this article.
This is an indicative estimate. State-specific IT/ITES policy exemptions vary by state and are described here in general terms only — confirm your own state's exact scope, and your entitlement, with your employer's HR/payroll team or a qualified professional before relying on this for financial decisions.