The Payment of Gratuity Act, 1972 requires an employee to render 5 years of "continuous service" (Section 4(1)) before gratuity becomes payable, except where employment ends by death or disablement — those exit reasons have no waiting period at all. "Continuous service" itself is defined in Section 2A: a year in which the employee actually worked at least 240 days counts, with a lower 190-day threshold for employees working below ground in a mine, or for establishments that work fewer than six days a week.
A significant judicial gloss sits on top of the literal 5-year rule. In Mettur Beardsell Ltd. v. Regional Labour Commissioner (Central) (Madras HC, cited as 1998 LLR 1072), the court read Section 2A(2) to mean that an employee who completes 4 years of service and then 240+ days of continuous service in the 5th year has, in law, completed that 5th year — making them eligible without waiting for the calendar 5-year mark to pass. This is a judicial interpretation, not the literal statutory text, and it is not uniformly applied — other courts have required the full, literal 5 years, and there is no Supreme Court ruling settling the question nationally. Treat it as a position to confirm for the applicable jurisdiction, not a universal rule.
Once eligibility is established, gratuity is computed as 15 days' wages (last drawn basic + dearness allowance, divided by 26 working days) for every completed year of service — with any remainder in excess of 6 months rounded up to a full year (Section 4(2)) — subject to a statutory ceiling of ₹20,00,000 (in force since 29 March 2018). Gratuity can be wholly or partly forfeited under Section 4(6) where the termination is on account of riotous or disorderly conduct, an act of violence, or an offence involving moral turpitude committed in the course of employment.
An employee resigns after 4 years and 9 months of service in a covered establishment with a six-day working week, having worked 250 days in the final year, last drawn basic + DA ₹45,000/month.
