New Labour Codes Bring Major Changes to Gratuity and PF Rules: Which Workers Will Benefit Most?

The Indian government’s new labour codes, officially enforced from November 21, have introduced large-scale reforms that are expected to reshape the country’s social security and employment landscape. Replacing 29 existing labour laws with four consolidated codes, this move aims to modernize India’s labour framework, simplify compliance for businesses, and bring a wider workforce into the formal protection system.

One of the biggest beneficiaries of these changes will be workers who were previously excluded from social security — including fixed-term employees, contract workers, gig workers, and platform-based professionals such as app-based drivers and delivery partners.

Faster Access to Gratuity for More Workers

Under the old rule, only permanent employees who completed five continuous years of service were eligible for gratuity benefits. This left contract-based and temporary workers without long-term financial security.

The new labour codes change this significantly:

✔ Fixed-term employees (FTEs) and some contract workers can now receive gratuity after just one year of service
✔ The five-year rule remains for permanent staff
✔ Gratuity calculation continues to follow the existing formula — 15 days of last drawn salary for every completed year of service

This reform greatly expands access to exit-benefits, giving employees better stability and recognition for their contribution regardless of employment type.

PF Coverage Now Extended to Gig & Platform Workers

Another major transformation lies in the Provident Fund (PF) system. Until now, PF was primarily available only to traditional formal-sector employees working under recognized establishments.

Under the new codes:

• Gig workers, platform workers, fixed-term staff, and more categories are set to gain PF-like social security benefits

• Both employers and employees will contribute to the fund wherever PF rules apply

• Employers classified as aggregators (e-commerce, delivery apps, ride-hailing services) must deposit a portion of their annual turnover into a dedicated social security fund for gig and platform workers

With Aadhaar-linked Universal Account Number (UAN) portability, workers can now seamlessly access their PF benefits even when changing jobs or relocating to another state.

This marks the first time India has brought millions of digital-economy workers into a structured social protection mechanism.

Industries Most Affected by the New Rules

Legal and HR experts believe the reforms will create a major impact in:

• IT and IT-enabled services (IT/ITES)

• Manufacturing and MSME sectors

• Logistics and transport

• Textile and retail

• Gig and platform-based delivery and mobility services

• Hazardous industries with stricter safety guidelines

Companies will now need to align compensation structures, workplace safety standards, night-shift rules for women, and compliance frameworks with the new nationwide standards.

What Do the New Codes Mean for Workers?

Key benefits for employees include:

• Greater financial security with expanded PF and quicker gratuity eligibility

• Formal social security coverage for gig, contract, delivery and freelance workers

• Stronger workplace rights, uniform rules and safety standards across states

• Easier transfer of benefits during job or location changes

This transition is expected to significantly strengthen protection for the workforce that drives India’s fast-growing digital and service economy.

What Changes for Employers?

Businesses will need to:

• Revise payroll and salary structure to comply with new social security rules

• Update HR policies and contract formats

• Ensure timely PF contributions for a wider employee base

• Adopt employment models that support inclusion and sustainability

Experts say that while adjustments may take time, the reforms create a more transparent and future-ready labour ecosystem.

The Bottom Line

The new labour codes aim to strike a balance — simplifying India’s complex labour laws while creating a more inclusive social protection system. With gig and contract workers finally receiving formal security benefits, millions of individuals will now have access to better financial stability and long-term welfare.

The shift is expected to define the future of work in India — fairer, more progressive and aligned with a rapidly changing employment market.