Gratuity Eligibility in India 2026
Eligibility by Employee Type
| Employee Type | Minimum Service | Applicable From |
|---|---|---|
| Permanent Employee | 5 years (or 4 yrs + 240 days) | Payment of Gratuity Act 1972 |
| Fixed-Term Contract Employee | 1 year | Nov 21, 2025 (New Labour Codes) |
| Death or Disablement | No minimum | Any period of service qualifies |
| Government Employee | 5 years (pension rules differ) | CCS (Pension) Rules |
The "240 Days" Rule — Court Interpretation
The Payment of Gratuity Act states "five years of continuous service" but does not define exactly what constitutes a year. The landmark Madras High Court ruling in Mettur Beardsell Ltd vs RLC established that 240 working days in any given year equals one complete year of service for gratuity purposes. This stems from the 26 working-day formula used in the Act itself (15 days × 26 working days per month).
What This Means in Practice
Important Note
The 240-day ruling is from the Madras High Court and is not uniformly binding across all Indian states. Some employers or tribunals in other jurisdictions may insist on a strict 5-year interpretation. When in doubt, consult a labour lawyer or file a claim — the Labour Commissioner will adjudicate.New 1-Year Rule for Fixed-Term Employees (2025)
The Social Security Code 2020 introduced a landmark change: fixed-term contract (FTC) employees are now entitled to gratuity after completing just 1 year of continuous service. This was notified and made effective on November 21, 2025 — a major win for contract workers in India's growing gig and services sector.
Qualifies (1 Year)
- ✅ Fixed-term contract employee with defined end date
- ✅ Completed at least 12 months of continuous service
- ✅ Contract issued after November 21, 2025
Still Needs 5 Years
- ❌ Regular permanent employees (no tenure end date)
- ❌ Contract workers without a formal FTC letter
- ❌ Apprentices and trainees
Calculate Your Eligibility & Amount
Used only to verify the 50% wage floor rule under the new Labour Code.
Wages will be at least 50% of monthly CTC
Enter your CTC/Salary and service period to calculate
Frequently Asked Questions
Is 4 years 7 months eligible for gratuity?
The standard rule says 5 years minimum. However, the Madras High Court ruling (and widely accepted industry practice) holds that 4 years and 240 days is equivalent to 5 years of service because 240 working days = roughly 1 year under the 26-day working-month standard. So 4 years and 7 months (≈7 × 26 = 182 working days) does NOT qualify under most interpretations. However, if those 7 months include period where you worked 240 days total after your 4th year, you may qualify. As of 2026, the safest threshold remains 4 years and 240 working days.
Is 4 years 8 months eligible for gratuity in India?
4 years 8 months = approximately 240+ working days in the final year, which meets the Madras HC's "4 years 240 days" interpretation widely used for gratuity rounding. Many employers and labour tribunals treat this as equivalent to 5 years. After the new Labour Codes (effective November 2025), fixed-term employees need only 1 year, but permanent employees still require 5 years (or 4 yrs + 240 days per judicial precedent).
Is 4 years 6 months eligible for gratuity?
Generally no. 4 years 6 months (180 working days in final year) does not meet the 240-working-day threshold recognized by courts. Permanent employees would not qualify in most circumstances. The Payment of Gratuity Act Section 2A requires continuous service, and the 5-year minimum is strict for permanent employees unless death/disability applies.
Is 4.5 years eligible for gratuity?
4.5 years = 4 years and 6 months, which is approximately 156 calendar days or about 130–156 working days in the final year. This does not meet the 240-working-day threshold. Under current law, 4.5 years does not qualify for gratuity for permanent employees. Only fixed-term contract employees need just 1 year under the new Labour Codes (effective November 2025).
What is the gratuity eligibility for fixed-term employees in 2025?
Under the Social Security Code 2020 (notified with rules effective November 21, 2025), fixed-term contract employees are entitled to gratuity after completing just 1 year of continuous service. This is a major benefit compared to the old law which required 5 years even for contract workers. The formula remains the same: (Basic + DA) × 15/26 × Years.
Does gratuity eligibility require 5 years or 4 years 240 days?
The Payment of Gratuity Act 1972 states 5 years. However, the Madras High Court held in Mettur Beardsell Ltd vs Regional Labour Commissioner that 240 working days (≈4 years + 240 working days in year 5) is equivalent to completing the 5th year. While this ruling is not binding on all High Courts, it is widely followed by labour tribunals. Many employers accept 4 years 240 days as meeting the eligibility threshold.
Is gratuity eligibility 1 year for private employees after new rules?
Only for fixed-term contract (FTC) employees from November 2025 onwards. Regular permanent employees still require 5 years (or 4 years + 240 days). The distinction matters: if your offer letter/contract specifies a fixed tenure with a defined end date, you are a fixed-term employee and now qualify after 1 year. If you are a regular permanent employee with no end date, the 5-year rule remains.
What happens to gratuity eligibility on death or disability?
The 5-year (or 1-year) minimum service requirement is completely waived in cases of death or permanent disablement of the employee due to accident or disease. In such cases, gratuity is paid based on the actual years of completed service, even if it is less than 1 year.