Understanding Continuous Service for Gratuity: Do Holidays Count Towards the Required Days?

Dear All,

Can anyone explain to me what continuous service in gratuity means? And how many days does an employee need to complete in an organization? Are holidays like Saturdays, Sundays, or any festival holidays declared by the company counted in those days?

Thank you in advance.

An employee shall be said to be in continuous service for a period if he has, for that period, been in uninterrupted service, including service which may be interrupted on account of sickness, accident, leave, absence from duty without leave, lay-off, strike, or a lock-out or cessation of work not due to any fault of the employee, whether such uninterrupted or interrupted service was rendered before or after the commencement of this Act.

For details, refer to section 2A of the Payment of Gratuity Act.

Yes, holidays like Saturdays, Sundays, or any festival holiday declared by the company are counted in the 240 days of service required for computing 'Continuous Service' under the Payment of Gratuity Act 1972. The principle is that what is uninterrupted is continuous service, not necessarily the on-duty days.

Eligibility Criteria for Gratuity Under the Payment of Gratuity Act, 1972

There is a wide interpretation of eligibility criteria and the number of days under the Payment of Gratuity Act, 1972.

Eligibility

The minimum service period that entitles you to gratuity is 5 years of continuous service. Continuous service is defined as "a period of uninterrupted service, including service which may be interrupted on account of sickness, accident, leave, absence from duty without leave, lay-off, strike, or a lock-out or cessation of work not due to any fault of the employee."

Further, in any calendar year, 240 days of service may be considered as having worked for one year. All holidays, weekly offs/Saturdays/Sundays/leave with wages, etc., are counted as working days for the purpose of the calculation of gratuity. There is a Madras High Court judgment stating that 4 years and 240 days of service will make you entitled to gratuity. 240 days = 8 months.

Thus, an employee is entitled to gratuity if she satisfies 3 points:

1. She has 4.8 years of continuous service (i.e., she didn't resign or otherwise dissociate with the company in between).
2. She was not terminated for any reason, including fraud, moral turpitude, etc., which would make her ineligible to claim gratuity.

Hope the above clarifies.

Regards