Gratuity Dilemma: Who Pays When Employees Move to a New Company After a Split?

Friends,

My company has two directors; they are also brothers. In 2014, both of them separated, with one starting a new company. They also divided the staff according to their convenience. Now, my question is: the employee who shifted to the new firm is entitled to gratuity from whom (the previous employer or the new one), considering they worked for more than 10 years in the previous company and are still working at the new firm. If the staff claims their gratuity from the previous employer, they will undoubtedly incur losses. Please guide.

Thank you.

Shri Singh: The new company does not owe gratuity with respect to the service rendered in the previous company unless it is so provided in the Articles of Association/Memorandum of Association of the new company.

The company has two directors, and now both are separated. The company is divided into two firms. In this case, what about gratuity? Some employees have transferred to the new company. In this scenario, is an employee's service treated as continuous? How can one transfer gratuity from the old company to the new company?

As per the Payment of Gratuity Act 1972, the employer is required to take a gratuity policy covering their liability. If both companies have taken gratuity policies, it is easier; otherwise, at this point, realizing gratuity from the former employer is not an easy task. Anyhow, check the position. If the policy is not there, then come back to the forum.