Are We Entitled to Gratuity or Benefits After Our Company Was Sold?

We are working in a private limited company, dealing with stock broking business in Karnataka. The number of employees is 4. We have been working for nearly 20 years, and at no point in time have the number of employees been more than 10. The management has now sold the company, and the new management is offering continuity in service. However, neither the old management nor the new management is willing to pay or compensate us for the years of service that we have already put in. There are no provident fund (PF) or any other benefits for us. We would like to know if we are eligible for any terminal benefits.

Thank you.

Applicability of Labor Enactments

Since the total number of employees has been less than 10 for the last several years, labor enactments requiring a certain minimum numerical strength of labor for applicability, like the Payment of Gratuity Act, 1972, will not be applicable to your establishment as long as this condition persists.

Therefore, as of now, in cases of normal termination of employment such as retirement on superannuation, resignation, or dying in harness, you are not eligible for any terminal benefits.

For all these benefits like PF, Medical, Gratuity, bonus, etc., the employee strength has to be at least 20. However, I advise you to please read the offer/appointment letter if you have. Hope it helps!

Regards,

If you have been working in an organization for the past 20 years and the number of employees in the organization has never exceeded 10, you are not eligible for any benefits such as ESI, PF, or Gratuity. However, if any benefits were specified in your offer letter, you can request them from your previous employer.

Compensation and Eligibility

The key point is, if your new employer is allowing you to continue your service, why are you asking for compensation from any of your previous employers? And what type of compensation are you seeking? To my knowledge, compensation can only be requested at the time of job termination, and even then, it comes with certain terms and conditions.

Seniors, please correct me if I am mistaken.

Regards,
Tanay Singh Kulshreshtha
HR Executive

Retrenchment Compensation Under Section 25FF of the ID Act

As per Section 25FF of the ID Act, the above employees are entitled to retrenchment compensation (when the new employer intends to retrench or close) from the new employer on the basis that their service has been continuous and has not been interrupted by that transfer. In other words, their past services are protected as far as the ID Act is concerned.

Regards,
Varghese Mathew
[Phone Number Removed For Privacy Reasons]

Respected Mathew Sir, Thanks for sharing that new information with us. According to the point you described above, the conclusion is that they already received the compensation in the form of their continuous service. Please correct me if I am wrong.

Regards, Tanay Singh Kulshreshtha HR Executive

There is another dimension here. The following points may require consideration:

1. Whether the new company will have a strength of 20 or more after the joining of these four?
2. What do they mean by continuity of service? Will they reckon past service for all intents and purposes?
3. Is the new company covered under various welfare legislations like EPF, ESI, etc.?
4. Will the service conditions improve after joining the new company?

Thank you.

Since the total number of employees has been less than 10 for the last several years, labor enactments that require a certain minimum numerical strength of labor for applicability, like the Payment of Gratuity Act, 1972, will not be applicable to your establishment as long as this condition persists. So, as of now, with normal termination of employment such as retirement on superannuation, resignation, or death in harness, you are not eligible for any terminal benefits.

Employee Concerns Regarding Company Sale

Our contention is that when the old management has sold the company at a huge premium, are we, the employees who have contributed to the growth of the company all these years, eligible for any share? Just because our numbers are less than 10, can we be treated in this manner? Doesn't the principle of natural justice demand that our interests are also looked after?

Regards

It seems that you expect compensation as a partner in the business, which you are not. You talk about cheating, which is not reflected as they offered continuity in service. You talk about natural justice, which they will abide by as per provisions of relevant laws subject to applicability.

Of late, the trend is to cut the flab, and a change of management is the apt opportunity for them. But they are liberal. Thank them. No law can save you for your expectations. Think long term and act. Don't fall for gullible third parties' promises.

Best of luck.

I can very well understand your anguish about going home empty-handed after long years of continuous service in the organization due to a lack of entitlement to any terminal benefits upon the normal cessation of your employment. However, it is now too late. You should have advocated for appropriate provisions of a voluntary nature, such as EPF and Gratuity, with your previous management. Such actions are not forbidden by any law. At the very least, you could have collectively pushed for these demands before the change of management. This could have potentially prompted some action to be taken, compelling the vendor and buyer to include some form of retiral compensation for the employees in the transfer deed, instead of merely extending your services on paper with continuity.

Thank you for your kind reply. The fact of the matter is that one of us was indeed on the board of directors, but all the resolutions have been passed without his knowledge and in his absence. We were neither informed nor consulted. We were only presented with one choice: either to continue or get lost. Is it fair? Are we worse than animals to be treated like this? Is there no provision in the law that can come to our rescue?