As a Senior Labour Law Consultant observing the 2026 legal landscape, I can confirm that the 240-day rule remains fully valid and continues to serve as a cornerstone of India’s labour law framework.
The transition from the Industrial Disputes Act, 1947 to the Industrial Relations Code, 2020 has preserved this rule to protect workers from arbitrary termination and to ensure access to retrenchment and social security benefits.
1. Where the 240-Day Rule Still Applies (IR Code 2020)
Under Section 66 of the Industrial Relations Code, 2020, the 240-day benchmark is explicitly retained:
- Retrenchment Protection: Workers who have completed 240 days of service in the preceding 12 months cannot be terminated without:
- One month’s notice or notice pay
- Retrenchment compensation equivalent to 15 days’ average pay per completed year of service
- Closure & Lay-off Benefits: Employees meeting the 240-day threshold are eligible for compensation if the establishment shuts down.
2. The Big Change: 180 Days for Leave Eligibility
The Occupational Safety, Health and Working Conditions (OSH) Code, 2020 has introduced a pro-worker shift:
| Leave Eligibility | Old Rule | New Rule (2026) |
| Annual Leave | 240 Days | 180 Days |
This change makes it easier for workers to qualify for earned leave, especially in seasonal or short-term roles.
3. Gratuity Eligibility for Fixed-Term Employees (FTE)
The Code on Social Security, 2020 has modernized gratuity rules:
- Permanent Employees: Still require 5 years of continuous service, which includes the 240-day rule (i.e., 4 years + 240 days).
- Fixed-Term Employees: Now eligible for pro-rata gratuity after just 1 year of service, even if the contract ends naturally.
This reform ensures that contract workers are no longer excluded from long-term financial benefits.
4. What Counts Toward the 240-Day Total?
The following are legally recognized as part of “continuous service”:
- Lay-off Days: When the employer couldn’t provide work.
- Maternity Leave: Up to 26 weeks for eligible female employees.
- Sickness/Accident Leave: Authorized medical leave or injury during employment.
- Public Holidays & Weekly Offs: Included in the working day count.
Compliance Alert for 2026
For Employees: If you’re terminated at 230–239 days without misconduct, it may be an attempt to bypass your rights. You can challenge this via the SAMADHAN Portal, which is now fully operational for digital grievance filing.
For Employers: The Inspector-cum-Facilitator, empowered under the IR and OSH Codes, can access digital attendance logs. Patterns of terminating workers just before 240 days are flagged as Unfair Labour Practices under the Second Schedule of the IR Code.
Disclaimer: This article is for educational purposes and reflects the status of Indian Labour Laws as of early 2026. Because state rules and judicial precedents vary, please consult a legal professional for specific case advice.