Five years is still the rule for permanent employees. But there are three exits from it: fixed-term staff now qualify after one year, death and disablement need no minimum, and a line of High Court rulings counts a fifth year with 240 working days as complete. Leaving a few weeks too early can cost you ₹1,44,231 on a ₹50,000 salary.
| Situation | Minimum service | How it is paid |
|---|---|---|
| Permanent employee resigning, retiring or let go | 5 years continuous | 15/26 × basic + DA × years |
| Fixed-term employee | 1 year | Pro rata for the period served |
| Death | None | Pro rata, to nominee or heirs |
| Disablement due to accident or disease | None | Pro rata |
| Working journalist | 3 years | As for permanent employees |
If you are on a fixed-term contract, check that your appointment letter actually says so. Fixed-term means a written contract for a fixed period with the same hours, wages and benefits as permanent staff doing the same work. A permanent role labelled as a contract does not qualify for the one-year rule.
Finding: it is a court-made rule, not a line in the statute, and it is not settled. The Madras, Kerala and Delhi High Courts have applied it; the Supreme Court read the five-year rule literally in a 2020 case without deciding the point. An employer can refuse, and you would then have to take it to the controlling authority.
The argument comes from the definition of continuous service: a worker who has actually worked 240 days in a year (190 days below ground in a mine or where the establishment works fewer than six days a week) is treated as having completed that year. Courts that accept it apply that test to the fifth year.
| Case | Court, year | Held |
|---|---|---|
| Mettur Beardsell Ltd v. Regional Labour Commissioner | Madras HC, 1996 | 240 days in the fifth year completes it |
| Management of Salem Textiles Ltd v. Appellate Authority | Madras HC, 2011 | Same |
| Sreeja B. v. Regional Joint Labour Commissioner | Kerala HC, 2015 | Same |
| TV Today Network Ltd v. Ankita Sodhi | Delhi HC, 2024 | Same |
| Rajasthan SRTC v. Mohani Devi | Supreme Court, 2020 | Five years read literally (observation, not a direct ruling on 240 days) |
We have not read the full judgments; the summaries rely on LiveLaw's analysis, linked below.
A permanent employee who resigns or is let go needs five years of continuous service under Section 53 of the Code on Social Security, 2020. The exceptions are death and disablement, where no minimum applies, and fixed-term employees, who qualify after one year and are paid pro rata. Working journalists need three years.
Several High Courts have said yes: the Madras High Court (Mettur Beardsell, 1996; Salem Textiles, 2011), the Kerala High Court (Sreeja B., 2015) and the Delhi High Court (TV Today Network v. Ankita Sodhi, 2024) treated a fifth year with 240 working days (190 for work below ground in a mine or in an establishment working fewer than six days a week) as a completed year. Other rulings read the five-year rule literally, and the Supreme Court has not expressly settled it, so employers vary.
Not automatically. The rule that more than six months counts as a full year applies to the number of years in the formula after you qualify. Whether a shorter fifth year qualifies depends on the 240-day reading above, not on months.
Yes. Under the Code on Social Security, 2020, in force from 21 November 2025, fixed-term employees are entitled to gratuity pro rata after one year of service.
Service ends on your last working day, so a notice period you actually serve counts. A notice period bought out or waived does not extend your service.