Gratuity transfer policy one company to our another company

Respected seniors,

I work in a real estate company as an HR executive and I want to know about the gratuity policy and what the effects are if I transfer an employee from one company to another company and he hasn't completed 5 years of service. Please tell me if I can transfer, and if yes, what the procedures and rules are?

Thank you.

Gratuity is a terminal benefit payable to an employee based on a certain number of years of continuous and blemish-free service under the same employer. Therefore, the question of transferring gratuity from one employer or establishment to another does not normally arise because each establishment is a separate legal entity. However, in the case of several establishments operating under the same employer, and if their service conditions allow for inter-unit transfers, the amount of service rendered in one establishment can be transferred to another for the purpose of computing gratuity.

Respected Sir,

Is there any notification/guideline from the government authority? If yes, please share and also brief the procedure of transferring the gratuity.

Payment of Gratuity Act, 1972: Section 4 Overview

Section 4 of the Payment of Gratuity Act, 1972 prescribes as follows:

Gratuity shall be payable to an employee upon the termination of his employment after he has rendered continuous service for not less than five years,

(a) on his superannuation, or

(b) on his retirement or resignation,

(c) on his death or disablement due to accident or disease.

It is evident from the above that gratuity is payable upon termination, not on transfer. However, if certain sister concerns or subsidiary companies are under the same employer, and conditions of service provide for transfer from one company to another, then only the proportionate contribution of gratuity is transferred. There is no government order on it, but the government has no objection to the transfer of the proportionate share of gratuity from one company to another company if both companies are under the same group of companies.

Regards,
C.M. Lal
[Phone Number Removed For Privacy-Reasons]

Transfer is possible only within the same group of companies. In this case, the service will be considered continuous service for the eligibility of gratuity benefits.

Definition of "Employer" Under the Payment of Gratuity Act, 1972

Srivastava has given an appropriate answer, quoting the relevant section of the Payment of Gratuity Act, 1972. The definition of the term "employer" under section 2(f) of the Act specifies that it is the person or authority having ultimate control over the establishment mentioned in section 1(3). The various establishments mentioned in clauses (a), (b), and (c) of section 1(3) can be a single establishment or a group of establishments depending upon their constitution, such as sole proprietorship, partnership, a company registered under the Companies Act, 1956, or a society registered under the Societies Registration Act with or without branches.

However, for all purposes under the Payment of Gratuity Act, 1972, the employer remains the same person in relation to the establishment as a whole, even in the case of inter-unit transfer of employees among various units.