Gratuity Eligibility for Employees Moving Between Sister Companies: What's the Rule?

Gratuity Eligibility for Employees in Sister Companies

If an employee works for a particular company within a group for 8 years and then, after the complete shutdown of that company, joins another company under the same group and works there for 4 years, is he eligible for gratuity in the second company? This is considering he worked in the earlier sister concern for 8 years. Does he fulfill the eligibility criteria for gratuity?

If the employer decides to pay him gratuity money, how will it be calculated? Additionally, if the employer pays gratuity before the completion of 4 years in the present company, will this action break the rule of gratuity?

Classification of Companies Under the Companies Act

There is no such classification of companies incorporated under the Companies Act, 1956 or the Act of 2013, such as group company, sister company, etc. These are common or colloquial names used only informally within certain circles. Every company incorporated under the Act is a distinct and separate legal entity unless there is a common balance sheet with reciprocity of operations.

Inter-Company Transfers and Employee Awareness

Therefore, it is crucial for employees whose services are shuffled among such "group companies" or "sister concerns" to be aware of the existence of any contract facilitating inter-company transfers. They should check whether such a contract includes provisions for transfer with continuity of previous service rendered in the transferor company and the liability to pay the whole terminal benefits by the transferee company.