Am I Eligible for Gratuity After a Company Transfer? Seeking Clarification on Eligibility Criteria

I would require some clarification regarding Gratuity; please help me with this.

Gratuity Eligibility Inquiry

I joined ABC Pvt Ltd in February 2007. In April 2011, I was transferred from ABC Pvt Ltd to XYZ (Firm) under the same management to consolidate PF administration. I would like to know if I am eligible to claim Gratuity.

Key Points to Consider:

- I was shifted under the same management.
- I have been working at the same premises.
- I have been receiving PF benefits since April 2011.
- I have completed 5 years of continuous service.
- My salary has been paid into the same bank account since February 2007.

Please assist me in understanding the eligibility criteria for the gratuity amount.

Regards,
Arjun M

Yes, as per the Payment of Gratuity Act, you are eligible to receive your gratuity.

Regards,
S. Rajasekaran

Dear Mr. Arjun,

Your message is incomplete. Have you confirmed whether ABC has given you an appointment order or not? If ABC issued an appointment order, you are eligible for the payment of gratuity on completion of 5+ years. Companies do change their names for several reasons, but employees will be moved, and letters must be there for their continuance of service and service rules, which need to be maintained by the HR Department.

Regards

I appreciate and agree with Sr. Subba Rao as I have experienced this transition. In fact, it affected me. Transfer or transition could take place within the ambit of various concerns, but management remains the same. The only important thing is the issuance and acceptance of the "letter of continued service."

Labor/PF may ask for the issuance and acceptance of the "letter of continued service."

Note: If there is a takeover by different management, then things change, but it also depends on negotiations during the takeover.

Warm Regards,
A

In the strictest sense of the law, a change in the employer means the period of 5 years starts afresh when he joins a new employer. The private limited firm and the partnership firm owned by the same shareholders are two completely different legal entities and therefore different employers. So how he was "shifted" makes a difference. If he was actually shifted, meaning they gave him a letter asking him to work for the firm and confirming the extension of the period, then he will be eligible for gratuity for the full period. If they have given a fresh appointment letter, which mentions nothing of the previous employment, then the 5-year period starts from the date of the appointment. In this case, I understand it's not the change in the structure or constitution of the business, but a different entity doing the business.

Considerations for Transition

I appreciate and agree with Sr. Subba Rao as I have experienced this transition, in fact, effected one. Transfer or transition could take place within the ambit of various concerns, but management remains the same; the only important thing is the issuance and acceptance of the "letter of continued service." Labour/PF asks for the issuance and acceptance of the "letter of continued service." Note: If there is a takeover by different management, then things change but also depend on negotiations during the takeover.

Warm Regards,
A

What you are saying is not feasible. Without seeing actual documents, it is not possible to say much. However, it looks like you have a good chance of getting the support of the authority on gratuity (most probably the labor commissioner).

It is very clearly mentioned in the Payment of Gratuity Act, 1972, that if an employee is being transferred from one sister concern to another or one business unit to another and there is no gap in employment, the person will be eligible for payment of gratuity after completion of 5 years.

Regards,
Sanju Singh

I have been in continuous service under the same management for the past eight years. However, it was due to the PF that I was moved to the sister concern. Both organizations are at the same premises, and both are still in existence.

I kindly request you to let me know the section and clause that deals with the above case.

Thank you all for the information provided.

Regards,
Arjun M

I agree with Sanju Singh. Nowadays, it is a general practice to shift an employee to another sister concern unit or branch. It is important for an employee to know whether they are only transferred or given a full and final settlement. Now, PF is a universal account number, so it is not evidence of continuous service.

If an employee wants to continue services within that group, they should not accept the full and final settlement.

Thanks,
Amarsinh

This is very clearly explained in sec 2(A) of the Payment of Gratuity Act, 1972. The same issue happened in the case of Jeevan Lal v/s Controlling Authority (1982) 1 LLN 217. In this case, the court clearly mentioned that "An employee who is reemployed without any break in service will be eligible for gratuity."

You can also check it online.

Regards,
Sanju Singh