In Indian labour law, the number 240 isn’t just a digit—it’s the threshold that unlocks job security, retrenchment protection, and gratuity eligibility. If you’ve ever wondered why HR tracks attendance so closely or why you became eligible for benefits after a certain period, this is the guide for you.
1. What Is the “240-Day Rule”?
The concept of Continuous Service is a statutory safeguard for workers. Under Section 25B of the Industrial Disputes Act, 1947, and now Section 66 of the Industrial Relations Code, 2020, an employee is deemed to have completed one year of service if they’ve worked for at least 240 days in the preceding 12 months.
Why It Matters
Once you cross 240 days of service, you gain:
- Protection Against Retrenchment: Employers must provide 1 month’s notice and retrenchment compensation.
- Retrenchment Compensation: 15 days’ average pay for every completed year of service.
- Leave Entitlements: Under the OSH Code, 2020, annual leave eligibility now begins at 180 days, but the 240-day rule still governs retrenchment and gratuity.
2. What Counts Toward 240 Days?
It’s not just physical presence. The law includes several non-working days in your 240-day tally:
- Paid Holidays: Weekly offs, national holidays.
- Maternity Leave: Up to 26 weeks for eligible female employees.
- Lay-Offs: Days when the employer couldn’t provide work.
- Accident/Sickness Leave: Authorized medical leave due to workplace injury.
- Earned Leave: Leave with full wages.
These are recognized under both the legacy ID Act and the IR Code, 2020.
3. Gratuity Eligibility: The 4 Years + 240 Days Rule
Contrary to popular belief, you don’t always need to complete 5 full years to claim gratuity.
- Legal Precedent: Courts have held that 4 years and 240 days of continuous service qualifies as 5 years for gratuity purposes.
- New Labour Codes Update: Fixed-term employees are now eligible for pro-rata gratuity after just 1 year, regardless of the 240-day threshold, if the contract ends naturally.
4. Comparing Legacy vs New Labour Codes
| Benefit | Legacy Rule (ID Act/Factories Act) | New Rule (2026 Update) |
| Annual Leave Eligibility | 240 Days | 180 Days under OSH Code |
| Retrenchment Protection | 240 Days | 240 Days maintained under IR Code |
| Gratuity for Fixed-Term | Not eligible | Eligible after 1 year (pro-rata basis) |
5. Compliance Challenges for Employers
In the digital era, avoiding the 240-day threshold is risky:
- Aadhaar-Linked Attendance: Integrated with the Shram Suvidha Portal, making manipulation visible.
- Unfair Labour Practice: Terminating workers at 235 days to deny benefits is legally challengeable.
- Best Practice: Maintain a transparent Muster Roll that includes deemed service days to avoid litigation.
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.