Is Gratuity Mandatory for Employees Who Joined Before Company Registration?

Query on Gratuity Payment

I have a query regarding the payment of gratuity. Is it mandatory for a company to pay gratuity when an employee completes a tenure of 5 years, even if the company was registered only in 2008 and prior to that operated as a partnership firm?

We have two cases where employees joined in 2005 and left in 2011, and the company denied paying gratuity to them citing the aforementioned reasons. In this scenario, is it obligatory to pay gratuity to these employees?

Thanks & Regards,
Neha

If the employee was transferred, then their continued service renders gratuity applicable. If, at the time of detachment from the partnership, full and final settlement was made for those employees, then gratuity is not applicable if they resigned before completing 5 years of employment. (Company ID number newly issued, and job also made new employed).

There was no transfer/full and final settlement done at the time of detachment, nor any kind of documentation completed. As mentioned above, I understand that the Gratuity has to be paid since they have completed a tenure of 5 years. Whether the company was a partnership firm or registered, the company cannot deny payment of Gratuity. Kindly confirm.

Please review his personal file to understand his employment status as a new employee post-detachment. Additionally, if the full and final settlement was not completed, it is considered continued service, and gratuity is payable.

Going by the details of your post, your understanding is correct about the payment of gratuity.

Regards,
B. Saikumar
HR & Labour Law Advisor
Mumbai

Expert Opinions Needed on Legal Entity and Employment Agreement Issues

What are the views of our experts on the following:

• The partnership firm and the company are two different legal entities. Has the firm been converted to a Pvt Ltd Co under Section 565 of the Companies Act?

• Did the employee receive the new offer or employment agreement after the legal entity was formed? Do these issues matter?