CTC Gratuity Component Refunded - Impact on Legal Gratuity Eligibility Across Group Companies

Gratuity Eligibility Across Group Companies

One of my acquaintances received an offer from a company where gratuity was included as part of the CTC. He initially joined the company in April 2020. After one year, the company transferred him to another company within the same group. Although technically a different legal entity, it was part of the same group.

He worked in that second company for three years, and then in August 2024, he was transferred again to a third company, also part of the same group.

During his most recent transfer, the company processed a Full and Final (F&F) settlement, where they refunded the gratuity amount that was being deducted as part of his CTC, and then issued him a new appointment letter (likely to fulfill compliance).

Current Gratuity Situation

Now, as of April 2025, he has completed 5 years of continuous service (across all group companies). He asked the management whether he is eligible for gratuity as per government norms, which mandate gratuity payment after completing 5 years of service if he leaves the company now.

However, the management told him that they already paid him the gratuity amount that was part of his CTC during the F&F in 2024. His new employment is now considered fresh from August 2024. Therefore, he will only be eligible for gratuity again after completing 5 years from August 2024, not before.

He is confused and would like to know whether he is legally eligible for gratuity now, given that he has completed 5 years of service across group companies, and if the company is right in denying his gratuity claim based on the fresh employment argument. Please guide.

The situation described raises a crucial question about gratuity eligibility across group companies and the impact of a refunded CTC gratuity component on legal entitlement. In this scenario, the individual completed 5 years of service across multiple entities within the same group. However, the management's stance on considering his employment as fresh from August 2024 due to the refund issued during the F&F settlement is a point of contention.

To address this issue effectively, it is essential to refer to the relevant labor laws or policies governing gratuity payments. In many jurisdictions, including India, gratuity is a statutory benefit provided to employees after a specified period of continuous service. As per the Payment of Gratuity Act, 1972, an employee becomes eligible for gratuity after completing 5 years of continuous service with an employer.

Considering the specifics of the case, where the individual has completed 5 years of service across group companies, the argument for eligibility is strong. The fact that the gratuity amount was refunded during the F&F settlement should not negate the individual's entitlement to gratuity based on the overall duration of service rendered.

In this context, it is advisable for the individual to seek clarification from the company's HR or legal department regarding the interpretation of gratuity eligibility criteria. If necessary, consulting with a labor law expert or relevant authorities can provide further insights into the legal aspects of gratuity entitlement across group companies.

To summarize, the individual's eligibility for gratuity should be evaluated based on the total duration of service across all group entities, as per the provisions of the applicable labor laws. It is crucial to ensure that the individual's rights are upheld in accordance with the legal framework governing gratuity payments.

Hi Shruti,

This is a common issue faced by employees in group companies. As per the Payment of Gratuity Act, 1972, gratuity becomes payable after 5 years of continuous service—even if it's across different entities in the same group, provided the service is uninterrupted and the employment terms mention continuity.

However, if each transfer involves a Full and Final (F&F) settlement and a new appointment letter, it legally resets the service period, unless explicitly stated otherwise.

In your acquaintance’s case, since the company processed an F&F and refunded the gratuity portion during the last transfer, the employer may be treating the new role as a fresh employment contract from August 2024, thus restarting the gratuity clock.

That said, if he can prove continuity (same PF account, uninterrupted service, same location or duties), he may have a legal to gratuity.

You can also refer to this guide from Superworks for better clarity:
🔗 What is Gratuity Payment? :- https://superworks.com/what-is-gratuity-payment/

Hope this helps clarify the situation!