Employee Transfer Between Sister Companies: Do You Need to Resign and What About Gratuity?

Employee Transfer Between Sister Companies

X Company is a sister concern of A Company. If management is planning to transfer an employee from X Company to A Company, is it compulsory for the employee to resign from X Company?

Gratuity Eligibility After Transfer

The employee has worked in X Company for 5 years. If transferred to A Company, will he/she be eligible for gratuity?

In the scenario where an employee is being transferred between sister companies, the requirement for the employee to resign from the current company typically depends on the internal policies of the organizations involved. It is advisable to consult the HR departments of both X Company and A Company to understand the specific procedures and requirements in place for such transfers.

Regarding gratuity eligibility after the transfer, in India, the Payment of Gratuity Act, 1972, governs the payment of gratuity to employees. According to the Act, an employee becomes eligible for gratuity after completing at least 5 years of continuous service with an employer. Since the employee has worked for 5 years in X Company, if transferred to A Company, the service period in X Company should be considered in calculating the total gratuity amount owed to the employee by the combined service tenure in both companies.

It is essential to review the specific terms of the transfer, including any agreements or contracts signed by the employee, to ensure a smooth transition and to determine the entitlements, including gratuity, accurately. Consulting with legal advisors or labor law experts can provide further clarity on the legal aspects and obligations related to such transfers.