Facing Gratuity Discrepancy After Company Takeover: Can I Legally Challenge This?

I have been working with a company for almost 13 years now. About 5 years back, the company was taken over by another company. Now, I have been asked to leave, and I come to know that the old management had tied up with LIC, and the gratuity amount ceiling is 3.5 lakhs, whereas my entitlement is 6.3 lakhs. The EHRMS sheet also shows 6.3 lakhs as gratuity accrued. However, the present management now says that the old management has done the tie-up and I don't fall into their system of gratuity.

Is there a way out? Can I challenge them in a court of law for not informing me? I have saved the screenshot of the EHRMS report showing gratuity accumulation as 6.3 lakhs. Please guide.

Dear Anil,

The details are given under Section 4 of the Payment of Gratuity Act, 1972 as follows:

(3) The amount of gratuity payable to an employee shall not exceed three lakhs and fifty thousand rupees.

(5) Nothing in this section shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer.

Further, in the case between Pattathurila K. Damodaran v. M. Kassim Kanju, it was held that by a change of ownership, the relationship of the employer and employees subsists, and the new employer cannot escape from the liability of payment of gratuity to the employees.

Hence, you will have to prove that you are entitled to better terms of gratuity as per Section 4(5) and the contract for better terms of gratuity was not changed/changed but no intimation was given to you during the change of employer.

Regards,
SC

Thanks for the comment. The actual problem is that the old employer has tied up with LIC, wherein the upper limit has been fixed at 3.5 lakhs. However, they did not intimate anybody about this change.

In the current organization, they don't have any such tie-up. But they are saying that since we are from another division that was bought over by them, the regular rules/benefits of their company don't apply to us.

However, my eHRMS page shows a gratuity of 6.3 lakhs accumulated till date. So, can I challenge them, stating why were you misleading me until now?

Dear,

I could not understand your problem. What is this EHRMS page? Your maximum amount of gratuity should be 3.5 lakhs only as per the act, but why are you entitled to 6.3 lakhs? What is your justification for that?

Thanks,
J.S. Malik

EHRMS sheet is the online facility where an employee can access all his details, like salary slip, income tax deductions, leaves availed and balance, gratuity accumulated, etc. This site is maintained by the company for all the employees, and each employee is given a user ID and password.

Dear Anil,

The valid documents in this regard are Letter of Appointment/Terms and Conditions of Employment/Employment Policies/Contract of Employment/Letter of Promotion or Increment/Change in the Terms and Conditions of Employment. The EHRMS is an employee portal which has no validity in the eyes of the law unless explicitly stated in any communication given to you.

Regards,
Swastik

Dear All,

The Gratuity Act states that the minimum benefit under the Act is Rs. 3.5 lakh, but that does not restrict the employer to provide better benefits than the one mentioned.

I am aware of many organizations that have made it a policy to keep the gratuity benefit uncapped (as a long-term retention tool). In such cases, the employer can avail tax benefits up to Rs. 3.5 lakh only, and the additional money received by the employee is taxed at normal rates.

To Anil,

If your new company's gratuity policy states that the benefits are uncapped (without a 3.5 lakh limit), then you are entitled to your 6.3 lakh.

Even if your new employer had any understanding with your old employer regarding the transfer of liability ownership, it cannot affect your status.

Before taking any action, confirm the gratuity policy at the new employer. If it is uncapped, you can receive 6.3 lakh. If it is capped at 3.5 lakh, then even if the EHRMS shows 6.3 lakh, you are eligible for 3.5 lakh only.

Gaurav