Are contract, temporary, or startup employees eligible for gratuity?

In most cases, you do not need to be a permanent employee of a large, long-established company to be eligible. Startup employees are covered if the company has 10 or more employees. Fixed-term contract employees now qualify after 1 year of continuous service under the Code on Social Security, 2020, which came into effect on 21 November 2025.

Temporary staff on a company's payroll are generally treated like permanent staff. What matters is how you are employed, who your legal employer is, and how long you have served.

Does a startup have to pay gratuity?

Yes, if it has 10 or more employees. Company age and funding stage do not matter. Once the law applies to an establishment, it continues to apply even if headcount later drops below 10, for example after layoffs. Recognition under the Startup India scheme by the Department for Promotion of Industry and Internal Trade (DPIIT), or a tax holiday, does not exempt a startup from paying gratuity, because tax benefits and labour obligations are separate matters.

Are fixed-term contract employees eligible after one year?

Yes. Under Section 53 of the Code on Social Security, 2020, a fixed-term employee is eligible for gratuity after completing a year of continuous service, paid pro-rata for the period served. Before the Code, gratuity generally required five years of continuous service, so a two-year or three-year contract often ended without any gratuity. Two points to keep in mind:

• The one-year rule applies from the Code's commencement on 21 November 2025, not retrospectively.
• Pro-rata means you are paid for the service you actually rendered, not a full multiple of years. For the exact rounding of part-years, check your employer's computation against the code's rules.

Are temporary and probationary employees covered?

Yes, if you are on the company's own payroll. Time on probation counts toward your total service. If you spent six months on probation and then 4.5 years as a confirmed employee, you have completed five years. A "temporary" employee on the company's payroll, as opposed to one placed by an agency, is treated like a permanent employee once the minimum service period is met.

Apprentices engaged under the Apprentices Act, 1961 are generally excluded, and so are interns who are not on a regular employment contract. A trainee on a salaried employment contract is a different case, and that training period counts as service.

Who pays gratuity if you work through a staffing agency?

The agency is your legal employer, so the obligation sits with the agency, not the company where you are placed. If the agency has 10 or more employees, which most do, it is responsible for your gratuity. Your service with the agency counts even if you are moved between client sites.

Check your agency contract to see whether you are engaged as a fixed-term employee or on regular terms, because that decides whether the one-year or five-year requirement applies to you.

Do gig and platform workers get gratuity?

Not a traditional gratuity cheque from a single employer. The code legally defines gig and platform workers for the first time and provides for social security schemes for them, to be framed by the government and funded through contributions from the Centre, States, and aggregators. The specific benefits depend on the schemes that are notified, so check the latest notifications for what applies to your type of work.

How do variable pay and allowances affect gratuity?

Only "wages" count toward gratuity, and under the code those wages must be at least 50% of your total remuneration. Basic pay, dearness allowance, and retaining allowance count. Bonuses, commissions, and stock options (ESOPs) do not. If allowances and excluded components together exceed 50% of your total pay, the excess is added back to arrive at the wage used for gratuity.

This closes the gap for startup pay structures with a small basic and a large "special allowance." Gratuity is capped at ₹20 lakh.

What should start-up and contract employees do now?

1. Check your designation: Is your contract fixed-term or permanent? This decides whether the one-year or five-year rule applies.
2. Keep your documents: Offer letter, appraisal letters, appointment letter, and every payslip. You need them to prove your last drawn salary and service period if there is a dispute.
3. Submit your nomination: Fill in the gratuity nomination form (Form F under the Payment of Gratuity Rules, or its equivalent under the current rules) so your family can receive the amount if something happens to you.

Conclusion

Your job title matters less than your employment terms. Start-up employees are covered where there are 10 or more employees. Fixed-term employees qualify after one year. Probation counts toward service. Agency-placed workers claim from the agency. Gig workers are covered through schemes still being framed. Keep your documents and file your nomination.

Also read

• Gratuity after one year under the new labour law
• Gratuity rules 2026 for fixed-term, contract and gig workers
• What to do if your employer refuses to pay gratuity
• Gratuity tax: new regime vs old regime