Navigating Employee Transfers: Gratuity Eligibility Concerns in a Group of Companies

Employee Transfer and Gratuity Eligibility

My company is a group of companies (2 entities namely XX & YY), and we are planning to promote our YY Company. XX is a major company with a significant share of employees, around 500. We plan to move approximately 40 employees from XX to YY. Out of these 40, 15 employees have completed over 5 years, while the rest have been with the company for less than 5 years. The management's plan is to transfer these 40 employees, settle all their dues (such as PF, Leave encashment, and Gratuity for those eligible), and help them start their new journey in the YY Company.

Gratuity Eligibility Questions

Out of the 40 employees, 15 are eligible for gratuity, while the remaining 25 are not eligible.

1. If an employee completes 3 years in XX Company, then later joins YY and completes an additional 3 years, would they be eligible to claim gratuity for a total of 6 years when leaving YY Company?

2. In the scenario where gratuity has been settled for the 15 employees who have already completed 5 years in XX Company, and they are transferred to YY Company, would an employee who leaves YY after serving 2 years be able to claim gratuity for the 2 years in YY (considering the 5 years in XX have already been settled)?

Since this is a group of companies and the transfers are internal, please provide clarification on these matters.

Thank you in advance for your response.

Regards,
Madhan

There are two options here:

1. Transfer with continuation of service - Here, a new role is assigned but with the service continuing.
2. Moving to a new role by settling all the dues - Here, all the dues of the employees are settled, and they are moved into the new roles. It is considered as fresh employment. You have to give a fresh appointment letter and do other formalities.

Regarding Your Questions:

1. If the transfer takes place, yes, the employee is entitled to receive all benefits like gratuity (3 years in XX and 3 years in YY), so the total years of work in your company is 6 years.
2. You can't settle gratuity in part payment. Settle all the dues in the XX company or transfer them and pay all dues while leaving the YY company.