Gratuity is an essential retirement benefit meant for a token of acknowledgment for a regular job. It is anticipated that limits on the amount of gratuity will be considerably expanded under the new labour codes of 2026, along with additional provisions to ensure financial security for laborers. The measure comes as a consequence of growing inflation, demands from labor unions, and a pressing need to debilitate social security for the employees.
What is Gratuity?
Gratuity is a lump sum paid by the organization to long-serving employees with no fewer than five years of continuous professional relationship. The Payment of Gratuity Act of 1972 controls gratuity. The amount is calculated according to the duration of service and the basic pay of the last month.
Gratuity Limit Raise 2026
The current maximum gratuity limit for workers in India is at ₹20 lakh. When the new labour codes come into force in 2026, the government is mulling over increasing this threshold to ₹25-30 lakh. This will, in essence, ensure that those on the job in the day that they were hired or obtained the approval change strategy will have money for salary on their retirement or resignation.
Faster Settlement under the New Labour Codes
Confirmation is also emerging on the likelihood of gratuity disbursement at a faster pace than has previously been seen. The new rule keeps provision for the settlement of gratuity within the full and final settlement, precisely on the employee’s last day at work. This would end hassles and bring financial relief to retirees right away.
Implications to the Employees and Employers
For the employees, the increase in the gratuity ceiling is intended to give them more security during retirement. Workers need leaders that work without minding morality an inch apart from their personal interests. For the employers, it will mean restructuring payroll and financial planning. Labour unions lauded the move, which it says will shore up the workers’ rights and thereby bring a morale boost to the manpower in every industry.
Comparison of Gratuity Limits
| Year | Maximum Gratuity Limit | Key Change |
|---|---|---|
| 2010 | ₹10 lakh | Initial ceiling revised |
| 2018 | ₹20 lakh | Current limit under Payment of Gratuity Act |
| 2026 (Proposed) | ₹25–30 lakh | Higher payouts under new labour codes |
Conclusion
The enhancement of the limit after 2024 is considered by many to be one of the most significant labor code reforms in India. The move, which will raise the cap to ₹25–30 lakh and speed up the settlement process, is said to be made primarily to ensure stronger financial cover for employees. This remedial mechanism is set to become one of the more practical social security provisions for the gratuity scheme among millions of employees within the country, thereby eradicating a whole gamut of inflation.
