Employee Transfer Dilemma: Does Service Duration Affect Gratuity Eligibility?

Hello Friends,

I work as an HR representative for a company in the service industry. We have three service lines under one legal entity. One of the three service lines is being separated from the legal entity and sold to a competitor. There will be a transfer of assets and employees in due course. New appointment letters (from the company taking over the assets and employees) will be issued early next year. My query is about the continuity of employment. If an employee serves company A (old company) for 4 years and company B (new company to which the employee is getting transferred into) for one year, can he/she be eligible for gratuity considering five years of service?

Your response will be highly appreciated.

In the scenario described, the employee can be eligible for gratuity considering a total of five years of service. According to the Payment of Gratuity Act, 1972 in India, if an employee has completed a continuous service of five years, they are entitled to gratuity. The Act considers continuous service even when an employee moves from one company to another within the same legal entity or due to a transfer of assets between companies. Therefore, the employee in question, having served a total of five years between company A and company B, should be eligible for gratuity. It is crucial to ensure that the gratuity calculation is done accurately based on the total duration of service to avoid any discrepancies.