Section 20: Continuous Service and Counting of Service Period

Overview

This section deals with the calculation of ‘continuous service’ which is a crucial factor in determining an employee’s eligibility for gratuity under the Code on Social Security, 2020. Gratuity is a statutory benefit payable to an employee upon retirement, resignation, or termination of service, provided they have rendered the required minimum years of continuous service. Section 20 clarifies what constitutes uninterrupted service for gratuity purposes.

Who is Covered?

• This section applies to all employees covered under the Code on Social Security, 2020, irrespective of their wage or type of employment (permanent, fixed-term, etc.). However, the overall gratuity benefit is subject to the wage ceiling prescribed under the Code.
• To be eligible for gratuity, an employee generally needs to have completed at least five years of continuous service with the employer. Section 20 defines how this 'continuous service' is calculated.

Benefits and Contributions

• The benefit is gratuity payment to the employee, calculated based on the number of years of continuous service and the last drawn salary.
• Employer is solely responsible for funding the gratuity benefit. There are no contributions from the employee or the government. Employers can choose to fund gratuity through a trust fund or an insurance policy.

Procedure and Compliance

Calculating continuous service under Section 20 is straightforward. Any interruption in service due to reasons beyond the employee’s control – such as sickness, accident, maternity leave, authorized leave, layoff, strike (illegal strike is not covered), lockout, or cessation of work due to circumstances not attributable to the employee – does not break the continuity of service. For seasonal establishments, the minimum days required to be considered as continuous service are prescribed separately. Employers must maintain accurate records of employee service to ensure correct gratuity calculations.

Practical Examples

• Example 1: An employee works for a company for 6 years. During the 3rd year, they are on medical leave for 6 months due to an accident. Since the leave was due to an accident (beyond their control), the entire 6-year period is considered continuous service for gratuity calculation.
• Example 2: A company delays gratuity payment to an employee for more than 30 days after their retirement. This constitutes non-compliance with the Code on Social Security, 2020, and the employee can approach the appropriate authority for redressal, potentially including interest on the delayed payment.

Disclaimer

This article is for basic understanding of social security law and should not be treated as legal advice. For specific legal guidance, please consult with a qualified advocate.