For years, India’s labour laws have been a complex web of old rules, scattered provisions, and confusing compliance requirements. But now, with the Centre pushing forward the implementation of the new labour codes, things are about to change—especially when it comes to bonus and gratuity rules.
Wondering how these revised rules might impact your job, your business, or your salary package? Let’s break it all down in simple, friendly terms so you know exactly what’s coming.
Understanding the Big Shift: Why Labour Codes Were Introduced
Before we dive into bonuses and gratuity, let’s quickly address the big picture.
India had 44 separate labour laws, many of which dated back decades. Over time, they became outdated—it was like trying to run a modern smartphone on operating software from 1990.
To fix this, the government merged these laws into four comprehensive labour codes:
- Code on Wages
- Industrial Relations Code
- Occupational Safety, Health and Working Conditions (OSH) Code
- Social Security Code
These codes aim to:
- Simplify compliance
- Protect workers’ interests
- Boost ease of doing business
- Ensure uniformity across states
Under these new codes, the Centre is now revising bonus and gratuity rules—two benefits that significantly affect employees’ financial security.
Why Bonus and Gratuity Rules Are Being Revised
The biggest reason is uniformity and fairness. Earlier, different industries and states applied rules inconsistently, leading to heavy confusion.
The new proposal aims to:
- Update outdated thresholds
- Cover more workers
- Tighten compliance
- Ensure timely payments
- Adjust definitions linked to wages
In short, the government wants to modernize compensation rules and make them more worker-friendly while keeping employers accountable.
Bonus Under the New Labour Codes: What’s Changing?
New Labour Codes, Employees often look forward to their annual bonus—it’s more than money; it’s recognition. But the old Bonus Act had a lot of limitations.
Here’s how the revised rules may reshape the landscape.
Wider Employee Coverage
Earlier, bonus eligibility was restricted based on salary limits. Under the revised norms, these thresholds are expected to increase, meaning:
- More employees become eligible
- More companies will have to comply
- Fairer distribution of financial rewards
If you were previously just above the salary threshold and missed out—good news: that might change.
Bonus Linked More Strictly to “Wage” Definition
The new codes introduce a uniform definition of wages. And this matters a lot because bonus calculations depend entirely on wages.
This definition limits the percentage of allowances employers can exclude from wages.
Why does that matter?
Because some companies inflated allowances to shrink the “wage” component and reduce statutory payouts.
Under the new rules:
- Manipulating allowances will not be easy
- Bonus calculations become more standardized
- Employees stand to receive a more accurate payout
Potential Revision of Bonus Ceiling
The current bonus system caps both the minimum and maximum percentages.
These ceilings may be revised to:
- Match inflation
- Reflect wage growth
- Bring bonus payouts in line with economic realities
In simple terms, you might see higher bonuses depending on the final rules.
Gratuity Rules Under the New Codes: A Big Leap for Worker Security
Gratuity is one of the most important components of long-term employee benefits—it’s like a thank-you gift for your loyalty and service.
The Centre wants to revise gratuity rules to make the benefit more inclusive and fair.
Here’s how.
Gratuity for Fixed-Term Employees
Earlier, gratuity was paid only after 5 years of continuous service.
But under the new codes:
- Fixed-term employees become eligible
- Gratuity may be paid on a pro-rata basis
- Even short-duration employees get social security
This is a huge shift, given India’s rapidly growing gig and contract workforce.
Uniform Wage Definition to Impact Gratuity Amount
Just like with bonuses, gratuity depends on the wage structure.
With the new wage definition:
- The gratuity base will likely increase
- Allowances cannot be over-inflated
- Employees receive a more fair and substantial payout
You could think of it like a balloon—the more air (wage) inside, the bigger the reward at the end.
Coverage of Gig and Platform Workers
This is a historic move.
Under the revised labour codes, the government aims to:
- Bring gig workers and platform workers under social security
- Potentially extend gratuity and similar benefits
- Create a safety net for workers in flexible or digital roles
In an era where people can earn through apps, delivery platforms, freelancing, and various online gigs, this change is a long-overdue upgrade.
How Employers Will Be Impacted by These Revised Rules
New Labour Codes, While the new norms benefit employees significantly, employers too need to prepare for big adjustments.
Increased Compliance Requirements
Companies will likely need to:
- Update payroll systems
- Maintain detailed digital records
- Ensure correct wage structuring
- File timely reports to authorities
Think of it as moving from manual bookkeeping to a modern accounting system—there’s some effort initially, but accuracy improves significantly.
Higher Financial Liability
With broader employee coverage and higher benefit payouts, companies may have to:
- Allocate larger funds for bonuses
- Increase their gratuity provisions
- Maintain more transparent wage structures
However, this also leads to better employee morale, lower attrition, and improved productivity—a win-win in the long run.
Reduction in Misuse of Allowances
For years, many organizations used allowances creatively to reduce liabilities.
Now, the standardized wage definition closes those gaps.
This pushes companies toward:
- Cleaner salary structures
- Better compliance
- Reduced legal risks
Impact on Employees: What You Should Expect
More than anyone else, employees stand to benefit from these revisions.
Here’s what you may experience once the rules take effect.
Higher Take-Home Benefits
Though your monthly take-home salary may drop slightly if allowances shift into wages, your overall benefits—including PF, bonus, and gratuity—will increase.
It’s like investing ₹1 today to get ₹10 tomorrow.
Better Job Security and Social Protections
The revised rules give employees:
- More legal protection
- Stronger financial safety nets
- Better recognition for long-term service
- Coverage even in non-traditional employment
If you’re a gig worker or contractual employee, you’re no longer on the fringes.
More Transparency in Compensation
You’ll see clearer payslips, simpler salary structures, and more predictable benefits.
No more guessing why your bonus shrank or why gratuity seems off.
How the Revised Rules Promote a Modern Workforce
Work culture in India is evolving rapidly. Remote work, hybrid setups, gig roles, and shorter job cycles are becoming the norm.
The revised bonus and gratuity framework aligns with:
- Modern employment patterns
- Global labour practices
- Digital and gig economy needs
- Employee expectations in 2025 and beyond
This is not just a legal reform—it’s a shift toward the future of work.
State Governments Will Also Need to Adapt
Labour is a concurrent subject, meaning both Centre and states share responsibility.
For the revised bonus and gratuity rules to kick in, states must:
- Frame corresponding rules
- Notify implementation
- Coordinate with the Centre
Many states are still in the process of completing this step, which is why the labour codes haven’t been fully rolled out yet.
Expect more clarity as states finalize their versions.
Challenges Ahead: What Could Slow Down Implementation
New Labour Codes, Rollouts of major reforms often face hurdles. Some possible challenges include:
- Delays in state notifications
- Implementation costs for companies
- Need for robust digital compliance systems
- Training HR teams and labour officers
- Clarifying grey areas around gig worker benefits
But once implemented, the reforms will create a far more predictable and fair system.
Read More: International Labour Day 2025: Honoring Workers Around the World
Conclusion
India’s labour laws, The Centre’s move to revise bonus and gratuity rules under the new labour codes represents one of the most significant overhauls of India’s employment laws in decades. These changes aim to:
- Expand employee eligibility
- Ensure fairer and more transparent benefit calculations
- Modernize salary structures
- Bring gig workers and fixed-term staff into the social security net
While companies will need to adapt to new compliance norms, employees stand to gain stronger financial protection, better job security, and more equitable compensation.
The labour codes may have taken time to roll out, but when they do, India’s workforce will finally have a legal framework that matches the demands of a modern economy.
