Karnataka Compulsory Gratuity Insurance Rules-2024

Few clarification required with respect to the Fixed Term Contract employees under gratuity as per new gratuity rule in Karnataka

  1. is it mandatory to cover fixed term Contract employees under Gratuity (even when the Term is for only 1 year)

  2. if yes who should take the insurance ( Principal employer or Contractor(employee is not permanent employee of contractor))

  3. if yes, then if the employees exit after one year of Contract and are re-employed on requirement basis, how does the gratuity calculation work in this scenario since there is no continuity of employment to the employee for completing 5 years for being eligible for Gratuity

  4. if Principal Employer invest through the Contractor for Gratuity insurance, but after a year or within the year the contract with the contractor is terminated, how does the Invested Gratuity amount by the principal employer benefit to the principal employer since the amount cannot be withdrawn by the Contractor as per the rules & the same cannot be refunded to the Principal employer by the contractor and hence for the principal employer to take services from another contractor for supply of Term contract manpower where in again the principal employer needs to invest into the Gratuity insurance

  5. for the Contract Employees with one year Term & who are reappointed every year ( as on need of project) just one Year Gratuity Insurance being taken for these Employees by either contractor / principal employer)would it suffice without having to renew the Premium for second & subsequent years? since the employees are not being continued in their service years and rather rejoin as new employees after the Contract Terms)

ne more thing for information

Current scenario , The principal Employer provides Services based on the Annual Contract he gets or which gets renewed ( but no guarantee of being renewed every year for Long term) so possibility of Taking permanent employees is not Viable & same is for the Manpower Contractor as it’s a back to back contracts only from the Principal employer & no possibility of having permanent Employees


Gratuity is payable only if an employee works for five years. Therefore, fixed term contract employees for one year are not entitled to Gratuity.