Understanding Gratuity Eligibility and Employment Duration in Different Company Structures

Hello,

A few days ago, my previous company terminated several employees due to cost-cutting. I had completed 6 years and 4 months in that company, so I asked management for my gratuity. They mentioned they would inform me later after consulting with their chartered accountant.

After a few days, I inquired again about my gratuity. They denied payment citing a technical reason:

"CA stated that I had worked for two different companies:
1. XYZ Solutions (from April 2009 to December 2011)
2. XYZ Software Solutions LLP (Since January 2012 to June 2015, which was my termination date).
Legally, I have not worked in a single organization for 5 years."

The company founder is the same person for both companies. They did not provide me with an offer letter or appointment letter when I joined. An appointment letter was provided to me on June 30, 2015.

Is the company's reason for denying gratuity valid? Please advise me on how to obtain my gratuity benefits. Any kind of help would be greatly appreciated.

Thanks

If your directors are the same in both companies, you are eligible for gratuity for six years of service in both companies. Hence, you may prefer to lodge a complaint with the labor officer of your area to claim gratuity. The company cannot deny gratuity on the pretext of working in different companies. If you have a list of directors from both companies, you can attach it with the complaint and mention the same.

Gratuity is a welfare legislation. Laws generally get interpreted to ensure payment. Considering that both companies are under the same management, they cannot claim that you worked for two separate companies for less than 5 years. It is recommended to speak with the company and document the conversation. If there is still no response, escalate the issue to the Labour Commissioner in your area with a written complaint.

Dear Jitesh,

Other learned members have given their opinions. However, my post is for different reasons. You have given the subject heading as "Liable for gratuity or not?" I have changed it to "Eligible for gratuity or not?"

For info.

Dinesh Divekar

You are definitely eligible for gratuity because working in different companies with the same management does not affect the service period of an employee in different parts.

Hello kumaracme,

Thanks for the wonderful reply. I don't have a directors' list. How can I get that list if you know any way? My owner/boss is the same for both of the above-mentioned companies in a thread. Actually, my owner/boss deposited money into our salary account. If both companies' bank accounts have the same owner, then it's beneficial to me somehow to know the director/owner. I also have Form 16 for both companies. Are some details mentioned in Form-16 useful to me in any way? So I can prove that the management is the same.

Thanks & Regards

If it is true as you stated that you worked under two different companies, both legally separate, with less than five years of service in each company, then you are not eligible for gratuity. The position is different if you can prove that both companies are legally the same.

Is your company a private limited/public limited company or is it a partnership?

Does your company publish any annual reports, etc.?

You will have to do some homework to check who is running the company and what type of company they are.

If you obtain correct information, then the chances of claiming gratuity will increase. Many owners use these tricks to avoid gratuity, PF, etc.

The other important aspect is how the LLP was actually formed. If the LLP was formed by converting or taking over the proprietorship firm, then the entity remains the same, although the constitution has changed. In that case, the working of both the firms would really constitute a single entity, and you would be entitled to gratuity.

However, if the LLP was formed as an independent entity not connected with the previous business, or if the proprietorship has continued its independent existence after the LLP was formed, you would not be eligible for gratuity. Since you do not have the required details, the only way out for you is to speak to the authority under the gratuity act and file a complaint. The company would be required to present the details to him. If you are eligible, he will ensure that you get your dues.

Dear Jitesh Ji,

You are well aware that gratuity is paid to an employee who has completed 5 years of service in a company. Maybe you have worked in the organization for more than 6 years, but it should be in writing. When you yourself are indicating having received the appointment letter on 30th June 2015, then how are you eligible for gratuity is not understood.

"When you yourself received the appointment letter on 30th June 2015, how are you eligible for gratuity is not understood. These kinds of appointment letters are given by employers who may be trying to avoid payments like gratuity. However, when an employee complains about non-payment of gratuity, the labor inspector will check many things other than the appointment order - such as payslips, salary deposits to the bank, etc. Regardless of efforts to hide evidence, proof of employment always remains, and welfare legislation leans towards payment rather than avoidance of payments like gratuity."

Dear Jitesh Ji,

You are well aware that gratuity is paid to an employee who has completed 5 years of service in a company. Maybe you have worked in the organization for more than 6 years, but it should be in writing. When you yourself are indicating having received the appointment letter on 30th June 2015, then how are you eligible for gratuity is not understood.

Thanks for the reply.

In the appointment letter, the company mentioned that I have worked in a firm from April 2009 to June 2015. The date of appointment is also from April 2009. Based on the appointment letter, I can say that I worked in a firm for 6 years. The company is just playing a game with us by showing two different companies. They don't want to pay labor benefits.

Jitesh

Jitesh,

You are entitled to gratuity as per the facts mentioned by you. Approach the Labour Commissioner for relief and instructions for payment. There is no point in further discussion. Just submit a written application to the Labour authorities providing all relevant facts and then let things move ahead. Please update the forum on the final outcome.

Thank you.

Dear Jitesh Ji,

Your question needs a detailed and accurate reply. Please wait until Saturday for my views.