Fixed-term employment is work for a period written into the contract. The person is an employee for that period, not a permanent employee who can be kept on year after year without a fresh term. Wages, hours and the other conditions of a comparable permanent worker are the comparison the labour codes draw. This page is about gratuity, which is the part with a number you can check.
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Gratuity Calculator
Gratuity from basic pay and dearness allowance, with the 15/26 formula, the five-year rule and the ₹20 lakh tax-free line.
Open calculatorUnder the Payment of Gratuity Act, gratuity on resignation or retirement needs 5 years of continuous service. Death and disablement do not use that test. The Code on Social Security, 2020, changed the fixed-term case. Section 53 of the Code on Social Security, 2020 is the section PIB cites. The government reduced the eligibility for a fixed-term employee from 5 years to 1 year. If the employee completes one year of continuous service, gratuity applies on a proportionate basis.
The Ministry of Labour FAQ of 16 March 2026, at the fixed-term answers, states the test as service under the contract for one year from the start of the contract. It does not say that any exit before the contracted end date earns a fraction of a year. Proportionate, in PIB’s sentence, is how the amount is worked once the one year is complete. It is not a rule that one month of a fixed-term contract earns one-twelfth of a year’s gratuity.
The amount
The payment factor stays 15 days’ wages for every completed year, or part of a year in excess of 6 months, on the last drawn wages. For monthly-rated staff that is 15/26. For an exit on or after 21 November 2025, the FAQ says last-drawn wages apply to the whole service. The service is not split at that date. The ceiling notified by S.O. 1420(E) dated 29 March 2018 is still ₹20,00,000.
The codes have been in force from 21 November 2025, which is the date in that FAQ and in the Lok Sabha reply of 20 July 2026. PIB’s note, posted on 22 November 2025, states the one-year rule and the proportionate basis. It does not itself print the calendar date the FAQ uses. Central Rules were notified on 8 May 2026. The gratuity guide puts the fixed-term rule next to the formula and the ceiling. The gratuity calculator will refuse a fixed-term exit below 1 year.
Mistakes
- Applying the one-year rule to a permanent employee who resigns. That case still needs 5 years.
- Treating an 11-month contract as automatically entitled to a fraction.
- Using a ceiling above ₹20,00,000. This site does not.
Checked on 2 November 2026.
Questions
Does a fixed-term employee need five years for gratuity?
No. The five-year test is for resignation and retirement of other covered employees. PIB’s note of 22 November 2025 says fixed-term eligibility moved from 5 years to 1 year, and that gratuity applies on a proportionate basis after one year of continuous service. The ministry FAQ of 16 March 2026 requires service under the contract for one year from the start.
Is the gratuity formula different for a fixed-term employee?
The eligibility is different. The factor is the same 15 days’ wages per counted year, on last-drawn wages, with a part of a year beyond 6 months counted as a year. The amount payable under the Act still stops at ₹20,00,000. The [gratuity calculator](/tools/gratuity-calculator) has a fixed-term exit for this case.
What if the contract ends before one year?
The March 2026 FAQ does not create a shorter cut-off. It repeats the one-year-from-the-start test. An 11-month contract that ends before that year is not given a special fraction on that FAQ. Death and disablement remain outside the five-year test for covered employees generally.
Sources
Figures checked 2 Nov 2026.