Gratuity Dilemma: Does Transferring Within a Group Affect Eligibility After Resignation?

Hello Friends, I have a query regarding gratuity payment. What is the rule on the payment of gratuity for an employee who has been transferred within a group company and now decides to quit the group after serving for 3 years, with 2 of those years being with the parent company? Is he entitled to gratuity, or will it be considered as a new company?

I agree with your view, but my efforts to convince management have been futile as they say that the companies to which they have been transferred do not state being a sister or group company. Therefore, they would not be entitled to gratuity. Is there any workaround to prove to management that they are wrong?

Thanks,

Regards

If you have transferred the employee to your sister concern, you are liable to pay the gratuity. Where are you maintaining the gratuity registers? If you need more clarification, you can call me.

Regards,
Lakshminaryana
[Phone Number Removed For Privacy Reasons]

Dear Lakshminarayana,

Case Study: Gratuity Eligibility After Transfer

One company is named Mr. A, and the second company is named Mr. AB. The issue at hand is that Raju is an employee of Mr. A company, and he has been transferred to Mr. AB company. Both company managements are the same. Raju has worked for 3 years in Mr. A and 4 years in Mr. AB. My question is: Is Raju eligible to claim the gratuity amount from Mr. AB company, considering his total services of 5 years with Mr. AB?

Please explain the above case study.

Regards,
M. Chaitanya Krishna
[Email Removed For Privacy Reasons]

I think Mr. Chaitany has portrayed the case very well. The transfer letter has been issued by the HR Director and states that the other terms and conditions remain the same.

However, the total work period of the employee in the parent company stands at 2 years, and in the second company, it is 3 plus years. Now, the management is not willing to pay gratuity, stating that the period starts from the transfer to the second company and not from the beginning.

Please advise and share any law that clarifies the same under the gratuity scheme!

I am enclosing two attachments that will meet your needs. These are the two judgments given by the Madras High Court, where the meaning of "Employee" has been elaborated. You may share them with your management to clarify any doubts they may have and to assist the person in need.

Regards,
P. Vathiraj

With reference to your query regarding the payment of gratuity for the service rendered to the group companies, if the management of the companies is ignoring your legal dues, you have the option to file a claim under the Payment of Gratuity Act. Keep in mind to make both group companies respondents. Obviously, these group companies will comply and fulfill their obligations. You are eligible for gratuity amounting to Rs. 15 days' salary per year. The calculation will be done as per the provisions of the Gratuity Act, i.e., your basic salary multiplied by 15/26 times the number of years of service.

Regards,
R B Yadav
Advocate

Gratuity is payable to a person if they work for a minimum period of 5 years in the same company, whether it is a parent company or sister company, but the management must be the same. Records must be maintained by the HO.

Regards,
Hari

Also, my employer deducts the gratuity amount from my CTC. Can I claim this amount even if I were to leave the company before 5 years, as in this case, the money is coming from my CTC and is not being contributed by the employer?

I suggest that you should first write a letter to your company stating that you worked with Company A from this date to this date and with Company B from this date to this date. Your services were transferred from Company A to Company B not at your instance but at the instance of the management of Company A and Company B. The management of Company A and Company B is one and the same. There is no break in your service with Company A and Company B, and thus you have continuous service of more than 5 years. Under the circumstances, you are liable for gratuity under the Act. Request the company to settle your claim of gratuity at the earliest. Take acknowledgment of the letter. If the company denies your claim, write to the authority under the Act. You should get your gratuity. It is your right if the above things are established.

All the best.

In a case of transfer within a group company, the services rendered by the concerned employee with the previous company and the present one should be added together. If the aggregate of both periods is above 5 years, the employee in question is entitled to Gratuity Payment.

Important Consideration for Gratuity Payment

The most important thing to note is that the Date of Appointment does not change in a case of transfer. Since the later employer accepted the transfer voluntarily, they are liable to pay it.

Regards,
PKJAIN