Continuous service, in the Payment of Gratuity Act, is uninterrupted service. The phrase does the opposite of what a casual reading suggests. It keeps you inside the year when you were on leave, ill, laid off, or out because of a strike or a lock-out. It also keeps absence without leave, unless the employer has ordered that the absence is a break.
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Gratuity from basic pay and dearness allowance, with the 15/26 formula, the five-year rule and the ₹20 lakh tax-free line.
Open calculatorSection 2A then adds a day-count. You are deemed to be in continuous service for a period of one year if you have actually worked at least 240 days in the 12 calendar months before that year ends. If you work in a mine below ground, or the establishment is one that works fewer than six days a week, the count is 190 days. For a period of six months the counts are 120 days and 95 days. These are “actually worked” days. They are the deeming test. They are not a second way of counting the 15/26 payment.
Gratuity on resignation or retirement needs 5 years of this continuous service. The five years are completed years. Seven extra months do not turn four years into five for eligibility. Those months matter after you have qualified, because more than 6 months adds a year in the payment formula. Death and disablement do not need the five years. A fixed-term employee uses the one-year contract test instead.
Where else the words appear
EPF uses “continuous service” for a different result. Schedule XI excludes the provident-fund balance after 5 years of continuous service, or on ill-health, closure, or a cause beyond your control. That is a tax rule for the fund, not the gratuity formula. The employee contribution itself is 12% of wages. The EPF withdrawal guide is that set of rules. Do not copy the 240-day count into an EPF question, and do not copy the EPF wage ceiling into a gratuity question.
The gratuity guide puts the day counts in a table next to the formula. The gratuity calculator asks for completed years and extra months. It applies the six-month rounding only to the payment. The Act text used here is the ministry PDF, checked on 2 November 2026.
Mistakes
- Counting a Sunday-off workplace with the 240-day test when it works fewer than six days a week.
- Rounding four years and seven months up to five so that gratuity “becomes payable”.
- Treating a formal break-in-service order as if it were ordinary leave.
The day counts are section 2A. The payment rounding is section 4(2). They answer different questions.
Questions
Does leave break continuous service?
Authorised leave does not. Section 2A counts sickness, accident, leave, lay-off, strike, lock-out, and a stoppage that is not the employee’s fault. Absence without leave counts too, unless the employer has passed an order treating that absence as a break in service. A break that the order records is the one that interrupts the year.
What is the 240-day rule?
An employee is deemed to be in continuous service for a year if they have actually worked 240 days in the preceding 12 months. In a mine below ground, or in an establishment that works fewer than six days a week, the count is 190 days. For six months the counts are 120 and 95.
Do extra months help the five-year test?
No. The 5-year qualifying service uses completed years. A part of a year is not rounded up for eligibility. Rounding applies only in the payment formula, and only when the extra service is more than 6 months. Four years and seven months is still four completed years for the test.
Sources
Figures checked 2 Nov 2026.