When must gratuity be paid under the new labour law?

Gratuity should ordinarily be paid within 30 days from the date it becomes payable. If an employer delays payment, simple interest may run from the date the gratuity became due until it is paid. A narrow exception applies only when the delay is attributable to the employee, and the competent authority has granted written permission.

This guide explains the timeline under India’s labour code framework, what employees and employers should do, and why gratuity should not be confused with the separate rules for wage settlement. It reflects the legal position reviewed on 10 September 2026. State rules, notifications, and the facts of a dispute may affect the procedure, so readers should obtain professional advice for a specific case.

What changed under the new labour law?

The Code on Social Security, 2020 consolidated several central social-security laws, including the earlier gratuity law. The Central Government brought the four labour codes into force on 21 November 2025. The code now supplies the central framework for gratuity eligibility, calculation, payment, and enforcement.  For most regular employees, gratuity generally becomes payable after at least five years of continuous service when employment ends because of superannuation, retirement or resignation.

The five-year condition does not apply when employment ends because of death, disablement, or another exception stated in the code. Fixed-term employees have a separate proportionate gratuity rule under the code, so they should not assume that every employee becomes eligible after one year. The commencement of the code does not mean that every procedural detail is identical nationwide.

Employers and employees should check the applicable central or state rules, establishment coverage, and local competent-authority process.

When does the 30-day clock start?

The 30-day period starts when gratuity becomes payable, not necessarily when HR finishes an exit checklist or when an employee follows up. The triggering date depends on the event that ends employment and the facts that establish eligibility. Section 56 requires the employer to determine gratuity even if the eligible person has not submitted an application.

The employer should calculate the amount, notify the eligible person and the competent authority in writing, and arrange payment within the statutory period. If the employee has died, payment may be due to the nominee or, where applicable, legal heirs. A documentation gap should be resolved promptly rather than used to leave the amount undetermined.

Is the 2 working day wage rule the same as the gratuity deadline?

No. The two-working-day rule concerns specified wage payments when employment ends under the Code on Wages, 2019. Gratuity is a separate social-security benefit with its own 30-day rule. Combining the two deadlines into one “full-and-final settlement” promise can create legal and payroll errors.

What interest applies when gratuity is paid late?

A delay can attract simple interest from the date gratuity became payable until the actual payment date. The applicable rate is the rate notified by the Central Government, subject to the ceiling stated in section 56. It should not be described as a universal 10% rate unless a current notification directly supports that figure for the relevant period.

The exception is deliberately narrow. Interest may be avoided only when the delay is due to the employee and the employer has obtained written permission from the competent authority. Cash-flow pressure, internal approvals, or an incomplete payroll hand-off are not stated as automatic exceptions in the code.

Can an employer withhold gratuity over company property or misconduct?

Not automatically. Gratuity may be forfeited only on statutory grounds and only to the extent permitted by law. For example, the code addresses loss or damage caused by an employee’s wilful omission or negligence and specified serious misconduct connected with employment. Each ground requires factual and legal assessment.

A pending laptop return, notice-period disagreement, or routine clearance issue should not be treated as a blanket right to cancel the entire gratuity amount. Employers should document the issue, apply the statutory conditions, and obtain legal review before ordering any deduction or forfeiture.

What should an employee do if gratuity is delayed?

Start with a dated written request to the employer that identifies the employment-end date, length of service, and amount claimed, if known. Ask for the calculation, payment date, and reasons for any withholding. Keep the employment contract, payslips, service records, resignation or retirement letter, nomination details, and all correspondence.

• Confirm whether the establishment and employment fall within the code and the applicable rules.
• Send the claim or reminder through a traceable channel and retain proof of delivery.
• If the amount or eligibility is disputed, use the competent-authority process applicable to the establishment, and location.
• Ask for interest where the statutory conditions for delayed payment are met.
• Seek advice from a labour-law professional where forfeiture, succession, cross-state employment, or disputed service is involved.

For the procedural sequence, see ABSLI’s guide to the gratuity claim process.

What should employers do to avoid delayed payment?

Employers should treat gratuity as a dated statutory liability, not as an open-ended part of the exit workflow. HR, payroll, finance, and legal teams need one accountable process that begins before the last working day when an exit is known.

• Identify eligibility and the triggering event early, including fixed-term and death cases.
• Verify service and wage records and calculate the amount using the legally applicable wage definition and formula.
• Issue written notice and schedule payment within 30 days after gratuity becomes payable.
• Escalate disputes immediately rather than waiting for the deadline to pass.
• Record the notified interest basis if payment is delayed and retain evidence for any claimed statutory exception.

A group gratuity funding arrangement may help an employer plan and administer its liability, but it does not transfer the employer’s statutory duty to determine and pay gratuity on time. ABSLI offers group retirement solutions. Product suitability, benefits, exclusions, and obligations depend on the applicable policy documents.

Key takeaway

The central rule is straightforward: determine gratuity promptly and pay it within 30 days after it becomes payable. If payment is late, simple interest may apply. Employers should not rely on internal delays or routine clearance disputes as substitutes for the statutory process, while employees should preserve records and use the appropriate competent-authority route when payment remains unresolved.

Also read

• How the gratuity claim process works?
• What happens to gratuity after resignation or termination?
• Can you lose gratuity?
• How to claim gratuity after leaving a job?

[1] Government of India, India Code, Code on Social Security, 2020, especially sections 53 and 56 and the offences and penalties chapter: https://www.indiacode.nic.in/handle/123456789/16823

[2] Government of India, Ministry of Labour and Employment, commencement material for the four Labour Codes effective 21 November 2025. Publication team to attach the exact Gazette notification URL during LCMP review.

[3] Government of India, India Code, Code on Wages, 2019, section 17: https://www.indiacode.nic.in/handle/123456789/15793

[4] Live article reviewed on 10 September 2026: https://lifeinsurance.adityabirlacapital.com/articles/retirement-insurance/gratuity-payout-timelines-and-penalties-under-new-law/