Gratuity Dilemma: How to Handle Employee Benefits Across Multiple Companies?

I have three companies in the same group. My employee has worked for three years in the first company and two years in the second company. I am giving him gratuity from the second company. What expenses will be allowable under both of my companies?

The entire amount is to be allocated to the 2nd Company. The 1st Company's service period will be carried forward to the 2nd Company.

If in your internal accounting you are interested in proportionately allocating the cost, you may do so. As both organizations are yours, you may allocate as per your choice based on your finance department/auditor's advice.

Regards, S K Bandyopadhyay

Do you have a gratuity account with a bank? If yes, and it's a single account for consolidation, then no issues; money comes directly from there in favor of the beneficiary.

Gratuity Accounting Practices

Does the finance department keep gratuity accounting separate and show it as a liability? If yes, then Mr. Bandyopadhyay suggested the first legal entity transfer money to the second and then pay. If the legal agreement states that the company has the rights to transfer to subsidiaries or holdings as needed, find a way to apportion and pay it.

In essence, we need to pay if the payment terms are matured.

The cost of gratuity for the sister concern of the company shall be adjusted in the cost transfer during the preparation of the balance sheet.

Could you explain what you mean by "Expense Allowable"? Are you talking from an income tax point of view, company law accounting, or are you asking what can be deducted from the payment being made?