Am I Eligible for Gratuity After a Company Merger and 8 Years of Service?

Dear Sir,

I am Kumar. I have worked in a private limited company for 4 years, and the company has merged into another Limited company. I have continued my services, and my total tenure in both companies is 8 years and 4 months. I have recently resigned from the company.

I would like to inquire about my eligibility for gratuity. Your clarification and advice on this matter would be greatly appreciated.

Regards,
Kumar

Impact of Merger on Employee Service Rights

Normally, the merger of one organization with another does not affect the service rights and conditions of the existing employees of the organization that is merged unless there is a specific clause in the merger agreement stating that their services after the merger would be considered afresh based on provisions for payment of terminal benefits for the entire services rendered prior to the merger.

In the absence of such a specific clause or non-payment of terminal benefits, you are eligible for gratuity for the entire stretch of the service you rendered before and after the merger until your resignation.

Dear Mr. Umakanthan M,

What is the minimum limit of service for Gratuity in India, or does it vary from state to state?

Thank you.

Merger and Past Service Benefits

Normally, when a merger takes place, a document or agreement regarding the "option" with respect to the benefits of past service is obtained from those who are willing to opt for the merged units. This means that past service is carried over without any break. However, if anyone is not willing to work in the merged unit, they could be settled as per the entitlement or settlement terms.

In your case, I believe you should have signed such a document. If so, there should be relevant clauses in it. Please go through the document or declaration that you signed at the time of the merger. Since it seems you did not receive any settlement at that time, I don't foresee any problem with the payment of terminal benefits such as gratuity, PF, leave encashment, and bonus. Presumably, you might join another company. In that case, you should transfer your PF to your new employer.

Gratuity in Industrial Employment in India

In India, gratuity in industrial employment is governed by the provisions of the Payment of Gratuity Act, 1972, which is a Central Legislation. Rules have been framed by the Central Government and State Governments for their respective jurisdictions. The minimum length of service prescribed for normal termination of employment, such as attainment of the age of superannuation, retirement, retrenchment, resignation, or dismissal on disciplinary grounds other than riotous behavior or moral turpitude, is the completion of continuous service of not less than five years. This is consistent throughout the country. However, termination of employment due to death or disability caused by an accident or disease does not require the fulfillment of this condition.

Regarding service under the Central and State Governments, including the Defence Services, the payment of gratuity is governed by their respective Pension Rules. The minimum qualifying service is five years for termination of employment other than dismissal.

Regards