The Code on Social Security, 2020
Section 53. Payment of gratuity
In simple words
- Gratuity is payable when employment ends after at least five years of continuous service, whether by superannuation, retirement, resignation, death, disablement or the end of a fixed-term contract s. 53(1).
- Five years are not needed where employment ends by death or disablement, or for fixed-term employees, and a working journalist needs three years s. 53(1), provisos.
- The amount is 15 days’ wages at the rate last drawn for every completed year of service, or part of a year of more than six months s. 53(2).
- For a monthly-rated employee, a day’s wages is the monthly wage last drawn divided by 26 s. 53, Explanation 3. See the gratuity guide.
An explanation, not the law. The official text below prevails.
The limit on gratuity: ₹20,00,000
The Code says gratuity cannot exceed an amount the Central Government notifies (s. 53(3)). The Labour Ministry's FAQs on the Labour Codes say: “The maximum gratuity is as notified by the Central Government which is currently ₹ 20 lakhs.” (FAQ 12: official copy · our copy)
That figure comes from S.O. 1420(E) of 29 Mar 2018 under the old Payment of Gratuity Act, which says the amount “shall not exceed twenty lakh rupees” (official copy · our copy). On 1 Nov 2026, this library went through every Labour Ministry item in the Gazette of India since the Code began and found no new notification under the Code itself. The Code keeps notifications made under the old Acts in force until they are replaced, where they are not contrary to it (s. 164(2)(a)).
Service before 21 November 2025
Asked whether earlier service is worked out under the old Act, the Ministry's later FAQs reply: “The employee will be paid gratuity based on the rate of wages last drawn by the employee at the time of superannuation or retirement or resignation or death etc, on and after 21.11.2025 as per the provisions of Code on Social Security, 2020.” (FAQ 17, as on 16 March 2026: official copy · our copy)
FAQs are the Ministry's explanation, not the law.
Official text
(1) Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years,—
(a) on his superannuation; or
(b) on his retirement or resignation; or
(c) on his death or disablement due to accident or disease; or
(d) on termination of his contract period under fixed term employment; or
(e) on happening of any such event as may be notified by the Central Government:
Provided that in case of working journalist as defined in clause (f) of section 2 of the Working Journalists and Other Newspaper Employees (Condition of Service) and Miscellaneous Provisions Act, 1955, the expression "five years" occurring in this sub-section shall be deemed to be three years:
Provided further that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement or expiration of fixed term employment or happening of any such event as may be notified by the Central Government:
Provided also that in the case of death of the employee, gratuity payable to him shall be paid to his nominee or, if no nomination has been made, to his heirs, and where any such nominees or heirs is a minor, the share of such minor, shall be deposited with the competent authority as may be notified by the appropriate Government who shall invest the same for the benefit of such minor in such bank or other financial institution, as may be prescribed by the appropriate Government, until such minor attains majority.
(2) For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days' wages or such number of days as may be notified by the Central Government, based on the rate of wages last drawn by the employee concerned:
Provided that in the case of a piece-rated employee, daily wages shall be computed on the average of the total wages received by him for a period of three months immediately preceding the termination of his employment, and, for this purpose, the wages paid for any overtime work shall not be taken into account:
Provided further that in the case of an employee who is employed in a seasonal establishment and who is not so employed throughout the year, the employer shall pay the gratuity at the rate of seven days' wages for each season:
Provided also that in the case of an employee employed on fixed term employment or a deceased employee, the employer shall pay gratuity on pro rata basis.
(3) The amount of gratuity payable to an employee shall not exceed such amount as may be notified by the Central Government.
(4) For the purpose of computing the gratuity payable to an employee who is employed, after his disablement, on reduced wages, his wages for the period preceding his disablement shall be taken to be the wages received by him during that period, and his wages for the period subsequent to his disablement shall be taken to be the wages as so reduced.
(5) Nothing in this section shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer.
(6) Notwithstanding anything contained in sub-section (1),—
(a) the gratuity of an employee, whose services have been terminated for any act, wilful omission or negligence causing any damage or loss to, or destruction of, property belonging to the employer, shall be forfeited to the extent of the damage or loss so caused;
(b) the gratuity payable to an employee may be wholly or partially forfeited—
(i) if the services of such employee have been terminated for his riotous or disorderly conduct or any other act of violence on his part, or
(ii) if the services of such employee have been terminated for any act which constitutes an offence involving moral turpitude, provided such offence is committed by him in the course of his employment.
Explanation 1.— For the purposes of this Chapter, employee does not include any such person who holds a post under the Central Government or a State Government and is governed by any other Act or by any rules providing for payment of gratuity.
Explanation 2.— For the purposes of this section, disablement means such disablement as incapacitates an employee for the work which he was capable of performing before the accident or disease, resulting in such disablement.
Explanation 3.— For the purposes of this section, it is clarified that in the case of a monthly rated employee, the fifteen days' wages shall be calculated by dividing the monthly rate of wages last drawn by him by twenty-six and multiplying the quotient by fifteen.