Who is Responsible for Settling Full and Final Dues of an Employee on Deputation After Resignation?

Brand 'A' operates in the hospitality sector and manages hotels owned by other individuals in various cities across India for a fee. Currently, they oversee approximately 15 hotels nationwide.

The brand employs individuals for key positions such as General Manager and Finance Manager. Once trained, these individuals are deputed to units managed by the brand. During their deputation, the salary is disbursed by the unit where they are assigned for the duration of their posting. This practice serves two purposes: ensuring that employees receive their salaries within the stipulated statutory time frame and circumventing the challenges posed by GST on expense reimbursements.

As per the brand's policy, key personnel are rotated between different locations every three to four years throughout their tenure. Therefore, employees in these roles can expect to be transferred to new locations during their employment with the brand.

In the event of an employee resigning after a significant tenure, such as ten years, a question arises regarding who is responsible for settling the employee's full and final dues – the principal employer or the last employer the individual worked for before resigning.

Employee Service Details:

S.No. Station From To Tenure
1 Delhi 01.04.2015 31.12.2018 3 Years 9 Months
2 Jaipur 01.01.2018 31.03.2021 3 Years 9 Months
3 Jodhpur 01.04.2021 31.05.2025 4 Years 2 Months

Typically, employees serve for about three to four years at each destination. Consequently, the unit owners argue that since the employee did not complete five years of continuous service at a particular location, gratuity is not payable. Is the scenario altered if the employee completes five years at any one location?

I kindly request esteemed HR experts to propose viable solutions to prevent unit owners and resigning employees from resorting to legal actions against each other.

In the scenario described, the responsibility for settling the full and final dues of an employee on deputation after resignation would typically fall on the last employer the individual worked for before resigning. However, the specifics of this situation may vary based on the employment contract, company policies, and relevant labor laws.

To address the concerns raised by unit owners regarding gratuity payments based on continuous service at a particular location, it's essential to consider the legal requirements outlined in the Payment of Gratuity Act, 1972. According to this act, an employee is eligible for gratuity after completing five years of continuous service with the same employer. If an employee completes five years at any one location, they may be entitled to gratuity based on their overall tenure with the organization.

To prevent potential legal disputes between unit owners and resigning employees, it is advisable for Brand 'A' to establish clear policies and guidelines regarding the settlement of full and final dues, including gratuity payments. These policies should align with the relevant labor laws and ensure transparency in the process.

Furthermore, conducting regular reviews of employment contracts, updating policies to reflect legal requirements, and providing training to HR personnel and unit owners on labor laws can help mitigate risks and ensure compliance with regulations. Open communication channels between employees, unit owners, and the HR department are also crucial to address any concerns or issues related to the settlement of dues effectively.

Role of HR in Full and Final Settlement

The Head of HR or the Director of HR is responsible for the full and final settlement in any organization.