Why India’s New Social Security Code Might Cost You 5 Years of Benefits

India’s labour landscape is shifting significantly with the implementation of the Social Security Code 2020. As headlines are praising about the new provision of gratuity after staying with the job only one year, there might be a darker shade to it and the ordinary workers may lose their well-deserved cash. The code explicitly allows Fixed Term Employment staff to claim gratuity on a pro-rata basis (even after one year), bypassing the traditional five-year continuous service rule. This is however not the case with the normal permanent employees, who are still obligated to serve the entire five years. Assume you resign in four years and hope the new rules will apply to everyone and you have lost the entire gratuity eligibility- cost you five years of accrued benefits.

Impact on Gratuity Rules India

The most significant shift in the Social Security Code 2020 lies in how “continuous service” is defined for different categories. It was previously indicated in the Payment of Gratuity Act, 1972 that all employees had to complete a rigorous five-year term to be in line to receive a payout. The new code will help the financial prospects of the contract workers who hardly reach that five-year mark so that they get their dues in relation to their service.

Fixed Term Employment vs. Permanent Status

For those in Fixed Term Employment, the benefit is now accessible and pro-rated. This is however a provision that regular salaried individuals tend to misunderstand. The situation with permanent staff is no longer relaxed; the five-year point is absolute against them. A poor comprehension of the category you belong in under the new code may result in an untimely resignation and a gratuity-free settlement, so it is important to make sure you are out of your contract before you leave.