Understanding 'Break in Service' in the Gratuity Act: Is It Only for Government Jobs?

Dear Seniors,

What is meant by Break in Service as per the Gratuity Act? Can private organizations follow this policy? Or is it limited to Government Organizations only?

Thanks in advance.

In the context of the Payment of Gratuity Act, 1972, a break in service refers to the period during which the continuity of an employee's service is interrupted while the contract of employment between the employer and the employee remains in effect. In other words, any period of interruptions in service, other than those deemed to be non-interruptions under Section 2-A of the Act, constitutes a break in service for the purpose of gratuity.

Every establishment falling within the ambit of Section 1(3) of the PG Act, 1972 must follow it, irrespective of its sectoral classification.

Dear Prashant ji, while appreciating the reply by Umakanthan Sir to your query, I would just like to add the following:

Definition of 'Continuous Service'

The definition of 'Continuous Service' was introduced by the insertion of an independent section 2-A through an amendment in 1984 (effective from 1981), following the Honorable Supreme Court judgment in Lalappa Lingappa (1981 I LLJ 308). In this judgment, it was held that permanent employees were not entitled to payment of Gratuity for years in which they remained absent without leave and had actually worked for less than 240 days in a year. Additionally, it was stated that badli employees were not covered by the substantive part but fell within the existing explanation 'I' at that time, and therefore were not entitled to payment of Gratuity for the badli period, i.e., for years in which no work was assigned to them due to their failure to report to duty.

To address the hardships resulting from the Supreme Court ruling and to grant the right of payment of Gratuity to badli workers and others who worked for 240 days or more in a year/years, the Parliament re-enacted the definition of 'Continuous Service' through an independent section 2-A.

In continuation of what Umakanthan Sir and Korgaonkarji have said, I would also like to add that concerning employees of establishments which operate 5 days a week, the minimum number of days for continuous service is 190. This rule applies to employees working below the ground of a mine, even if the mine operates for 6 days a week. Additionally, this 240/190 days, as the case may be, includes all paid holidays, weekly off days, leave days, and even the days when the employee was on leave without pay following any employment injury.

It's important to note that we will not provide wages to an employee covered by ESI when they take leave due to an accident. However, these days will not interrupt their service. On the other hand, any loss of pay leave that is not regularized later, even as LOP days, will be considered an interruption of service. This aspect was also discussed in the Lalappa case mentioned above.

Madhu T K

Dear Sirs,

With regard to the above topics, I just need your thoughts on the following. I worked for ABC company for one year, resigned, joined XYZ company, and then returned to work with ABC company for four years. Now, having worked for a total of five years, am I entitled to gratuity or not?