Length of Service: Counting Years for Gratuity
Count completed years of continuous service from the joining date. Section 20 counts approved leave as completed service. A worked example.
On this page
- What "continuous service" means
- Breaks that do and do not interrupt it
- No-pay leave, maternity and long sickness
- Transfers between group companies
- Re-hires: does old service count?
- Worked example with a mid-year re-hire
- Frequently asked questions
- Does probation count towards the 5 years?
- Does a fixed-term contract count the same way?
- Do part-time years count the same as full-time years?
- What counts as the "joining date" if someone changed roles internally?
- Does the leave-year count work the same way as gratuity service?
- Does length of service matter at retirement too?
Count completed years of continuous service from the joining date to the last day worked. Section 20 counts service interrupted by approved leave as completed service. It sets no length limit. An unauthorised absence, or a resignation followed by a fresh hire, can put it in doubt.
This page is for the employer or the person running payroll, working out gratuity or leave for one employee. See 6 things to know about gratuity in Sri Lanka for the eligibility rules this service count feeds into.
What “continuous service” means
The Payment of Gratuity Act calls this “completed service” (s.20). The Act’s own words: “‘completed service’ means uninterrupted service and includes service which is interrupted by approved leave on any ground whatsoever, a strike or lock-out or cessation of work not due to any fault of the workman concerned”. Workman is the Act’s word for an employee it covers. This applies whether the interruption happened before or after the Act came into force.
The definition sets no length limit on the interruption.
Section 20 counts these as completed service:
Breaks that do and do not interrupt it
- Approved leave on any ground. That covers annual, casual, maternity and approved no-pay leave.
- A strike or lock-out.
- A stoppage of work that was not the employee’s fault, such as the business closing temporarily for reasons outside their control.
Can put continuous service in doubt:
- A long unauthorised absence, one the employer never approved.
- A resignation followed later by a fresh hire (a genuinely new period of employment).
- A gap the employer formally treats as ending the employment rather than as leave.
Section 20 names approved leave, a strike or lock-out, and a stoppage not the worker’s fault. It does not name unauthorised absence. Confirm a specific long-absence case with a labour law adviser before treating service as broken.
No-pay leave, maternity and long sickness
Section 20 treats a 3-month approved no-pay leave the same as a single day of approved leave. Its test is whether the leave was approved, not how long it ran.
Transfers between group companies
The Act gives one specific continuity rule. Where a public corporation or government business is converted into a company, service with the old body counts towards the new one’s 5-year threshold (s.7C). For an ordinary transfer between two private group companies, the Act sets no automatic continuity rule. Whether service carries over depends on the transfer agreement and the employment contract, not a general statutory right. Put the answer in writing before the transfer happens.
Re-hires: does old service count?
On a plain reading of the Act, no. A resignation ends that period of employment. A later re-hire starts a new one. On that reading, only the service from the re-hire date counts towards the 5-year gratuity threshold. Get this confirmed with the Labour Department for a specific case, since no general bridging rule was found in the Act.
Worked example with a mid-year re-hire
An employee joins on 1 March 2019. They take 3 months of approved no-pay leave in 2022. They resign on 31 August 2026.
| Step | Result |
|---|---|
| Joining date | 1 March 2019 |
| Approved no-pay leave in 2022 | Counted as completed service under section 20 |
| Last day worked | 31 August 2026 |
| Full years completed (1 Mar 2019 to 1 Mar 2026) | 7 completed years |
| Extra months (Mar–Aug 2026) | Not a completed 8th year |
| Gratuity (both true: 15 or more workmen on any day in the 12 months before the employee left, and 5 years’ continuous service) | 7 × half a month’s wage or salary, at the rate last drawn, for a monthly-rated employee |
Check the figure against the gratuity calculator, then see Final Settlement in Sri Lanka: What to Pay a Leaver for what else is due alongside gratuity. If the payment runs late, see Gratuity Not Paid on Time: Surcharge and Recovery for the surcharge that applies.
A different employee resigns on 31 December 2019, after 5 years of service, and is re-hired on 1 June 2021. On a plain reading of the Act, only the service from 1 June 2021 counts towards a future gratuity claim. The 2015–2019 spell does not carry forward.
Do this automatically in Humanised. Continuous service is a date you have to keep. An employee management system keeps the joining date, approved leave and any re-hire history against each employee. There is a free 7-day assisted trial, set up by the Humanised team on your own data.
This is general payroll guidance. Every case is different. For your own case, speak to a payroll practitioner or a lawyer.
Frequently asked questions
Does probation count towards the 5 years?
On a plain reading of the Act, yes. It counts completed years of service under the employer, and does not exclude the probation period from that count.
Does a fixed-term contract count the same way?
Yes, for the time actually worked under it. Whether a renewed contract runs on as one period of service is a case-by-case question; confirm it with the Labour Department.
Do part-time years count the same as full-time years?
The Act does not answer this directly. Confirm with the Labour Department how a part-time year should be counted for your specific case before relying on a figure.
What counts as the “joining date” if someone changed roles internally?
On a plain reading of the Act, the date they first joined the employer, not the date of their most recent role change. A promotion or transfer within the same company does not restart the count.
Does the leave-year count work the same way as gratuity service?
No. Annual leave is worked out year by year, prorated in the first year by the quarter the employee joined. Gratuity is worked out once, at the end, by counting total completed years from the joining date. They use different counting methods, even though both depend on how long someone has worked for you.
Does length of service matter at retirement too?
Yes, for the same gratuity calculation. See Retirement Age in Sri Lanka: What Employers Must Do for what else an employer must do at that point.
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