What Happens to Employee Benefits When a Partnership Firm Becomes a Private Entity?

Dear Sir/Madam,

Kindly let me know what happens to employees who have completed a tenure of 4-5 years in a partnership firm which later dissolves the company and forms a new private entity. What happens to the Gratuity benefit, etc., of such old-tenured employees?

So long as the company maintains its identity from partnership to private limited name, the gratuity benefits have to continue. However, if the company changes its name, then there is no question of this benefit.

Dear Sir,

Thank you for your valuable and expert advice. I am reconfirming the same: if the company name was XYZ Co. (partnership firm) and now, since 2013, it is known as XYZ Co. Pvt. Ltd., will the gratuity benefit continue for the old employees?

Thanking you.

There is a procedure laid down for converting a partnership into a private limited company. If the procedure is followed and all assets and liabilities are transferred from the partnership to the company, then gratuity can be claimed. [Procedure for Conversion of Partnership firm into company](http://taxguru.in/company-law/checklistprocedure-for-conversion-of-partnership-firm-into-a-company.html). However, if the partners want to evade responsibility towards gratuity, loopholes are there.

Gratuity is payable only if an employee completes 5 years of service. Once an employee has become eligible for gratuity, then the liability will continue whether it becomes a Pvt Ltd company at a later stage. Even if the name is changed, there are chances that the employee can claim.