Can I Claim Gratuity After 8 Years in a Company with Employee Rotation?

My organization is a Pvt. Ltd. company in architectural services. My boss runs two Pvt. Ltd. companies in the same profession and at the same address. He continuously rotates the employees within these two companies. The number of employees in both companies was more than 10, but currently, we are only 4 people working in one company. The second company is also running, but no business has been done for the last 3 years. I have been working for 8 years and 5 months. Please advise if I have the right to claim gratuity or not.

Thanks

Understanding Gratuity Eligibility for Commercial Establishments

I understand that this is not a manufacturing company, but rather a commercial establishment. Therefore, your establishment will come under the coverage of the Payment of Gratuity Act if you have at least 10 employees at any time. Currently, your average number of employees is less than 10, but your employer has another company in the same business, and you regularly deploy your employees there. It should also be assumed that there exists financial integrality, an arrangement whereby funds of this company are utilized in the other company and vice versa. If these can be proved, the two companies could be clubbed for all purposes relating to labor laws.

As such, the Employees Provident Fund authorities can make your establishment covered by the EPF & MP Act, and ESI officials can do the same for extending their schemes to your establishment. Similarly, labor authorities can treat your two establishments as one and make it covered by the Payment of Gratuity Act. Once covered by the Payment of Gratuity Act, you will become entitled to gratuity once you have the required service of 5 years with the employer.

If you have already left and the employer has refused to pay gratuity, claiming that the Act is not applicable to an organization with less than 10 employees, you can approach the Labor Department, the controlling authority under the Payment of Gratuity Act, and raise a dispute. You can narrate that there existed financial interdependency between the companies and there have been instances of shifting employees, and therefore, the two units are one and the same.

Regards, Madhu.T.K

Dear Surendra,

First of all, you need to know if your organization is registered under the Gratuity Act of 1972. Has a gratuity scheme been implemented by your employer?

If you have worked for more than 5 years or continuously in the same organization without changing your date of joining, then you are eligible for gratuity.

It is essential that you clarify all these points with your employer first.

From the above facts, I assume that your employer is rotating employees from one company to another periodically only to avoid paying statutory dues like ESI, PF, etc., which is an unfair labor practice. Please follow the advice of Mr. Madhu TK as mentioned above. If you have left the organization, then send FORM I first to your employer claiming the gratuity.

From your post, it appears that employees are not issued appointment letters. If they were issued, then a transfer letter would have been helpful.

Is the attendance of employees recorded anywhere? If yes, this record will be helpful. The boss will not provide gratuity easily; you will have to fight for it. How prepared are you?