Dear All,
I am putting a situation to be discussed here openly.
An employee 'RAM' is working in 'X' Group. The group operates by forming different companies. 'RAM' has been working for more than three years in one of the companies of 'X' Group. Suddenly he decides to switch over to another company within the group for monetary benefits.
Before switching he puts a condition to entitle him for gratuity and asks to enter provision in the books of accounts that whenever he will leave the job from the group his services should be counted uninterrupted and he should get gratuity from the previous compnay as per his length of service i.e. more than three years.
The company also agrees to him and put this on paper duly signed by the authorities. They term this as transfer from one company to another although after full & final settlement including encashment of PL.
Does his condition and authorization from the authoriites are legal as per The Payment of Gratuity Act ? Is there any provision in the books of law that supports his condition and decision taken by the authorities?
Kindly give you valuable inputs on this situation.
Thanks & Regards,
Satya
From India, Jaipur
1I am putting a situation to be discussed here openly.
An employee 'RAM' is working in 'X' Group. The group operates by forming different companies. 'RAM' has been working for more than three years in one of the companies of 'X' Group. Suddenly he decides to switch over to another company within the group for monetary benefits.
Before switching he puts a condition to entitle him for gratuity and asks to enter provision in the books of accounts that whenever he will leave the job from the group his services should be counted uninterrupted and he should get gratuity from the previous compnay as per his length of service i.e. more than three years.
The company also agrees to him and put this on paper duly signed by the authorities. They term this as transfer from one company to another although after full & final settlement including encashment of PL.
Does his condition and authorization from the authoriites are legal as per The Payment of Gratuity Act ? Is there any provision in the books of law that supports his condition and decision taken by the authorities?
Kindly give you valuable inputs on this situation.
Thanks & Regards,
Satya
From India, Jaipur
Since the ultimate employer of the group of companies is one and the same there is nothing wrong in treating services of employees at each unit as uninterrupted for the purpose of determining the eligibility and calculating the amount of gratuity. Gratuity Act also requires to find gratuity payable on an yearly basis and invest the same in insurance policies so that the employer would not face any problem when an employee leaves. It is implied that a provision for gratuity is to be made before the the accounts are finalised and filed for income tax purpose. Therefore, even without any express agreement about gratuity on transfer it shall be deemed that his past service with one unit of the same group has been transferred. Since the gratuity is payable by the unit where he works last and whereas it would not be justifiable if the entire amount is treated as that unit's cost alone , it is common that on each such transfer any gratuity provision made for the said employee will also be transferred to the unit to which he has been transferred.
Regards,
Madhu.T.K
From India, Kannur
Regards,
Madhu.T.K
From India, Kannur
- This is perfectly legal and there is no breach of any legal provisions.
In case any employer is providing more benefits than what is prescribed in a law, it is not breach of any provisions of law and it is welcomed.
Take a example of Minimum Wages Act. Act prescribes the Minimum Wages to be paid by employer. If we stick to the provisions of law, then there is no need to give any increments and salary rise and everyone in a particular category will draw same salary (Minimum Wages)
From India, Pune
Dear This is perfectly correct. Since the Management is one and the same they may treat previous service also for the purpose of gratuity. N Kannabiran
From India, Madras
From India, Madras
Dear All,
Thanks for your valuable input. Especial thanks to Mr.Madhu.T.K. for initializing the discussion and making a ground.
Only one querry after your clarifications, does it applies to all who resigns from one company and joins another within the same group even if they are unaware of this entitlement and do not put the condition of transfer ? In that situation should not the group authorities make them aware of this eligibility to pass the benefit of gratuity to them ? Is that employee authorised to similiar benefit even it is not expressed from either side ? Can he demand for that benefit ?
Kindly provide input on this case also.
It would be of great help.
Best Regards,
Satyajeet
From India, Jaipur
Thanks for your valuable input. Especial thanks to Mr.Madhu.T.K. for initializing the discussion and making a ground.
Only one querry after your clarifications, does it applies to all who resigns from one company and joins another within the same group even if they are unaware of this entitlement and do not put the condition of transfer ? In that situation should not the group authorities make them aware of this eligibility to pass the benefit of gratuity to them ? Is that employee authorised to similiar benefit even it is not expressed from either side ? Can he demand for that benefit ?
Kindly provide input on this case also.
It would be of great help.
Best Regards,
Satyajeet
From India, Jaipur
Mr. Satyajeet, you have raised a very valid point.
From India, Pune
- It seems inter company transfers within a group are common in your case.
- I would suggest that, your management should deleberate and discuss this matter with the available data on transfers and come up with a policy on this.
- It seems that, now only those having negotiating power are getting this benefit and there may be others who are either ignorant about this benefit or denied this benefit.
- In my opinion, all employees should be treated equally and continuity of services should be counted for all irrespective of position, grade etc.
- You may have to also think of formulating policy in other matters where length of service is of importance (seniority, promotions etc.)
From India, Pune
It applies to all employees who resigns from one company and joins another company of the same GROUP. This is because the responsibility of payment of gratuity lies on the employer and even if the employee who leaves the establishment is not asking for gratuity the employer has to pay it within thirty days of his leaving. However, to be specific it will be advisable to have a policy in this regard whereby such resignations would be deemed as transfers for the mutual benefit of employer and the employees.
Regards,
Madhu.T.K
From India, Kannur
Regards,
Madhu.T.K
From India, Kannur
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FORM-F-NOMINATI ON OF GRATUITY.pdf
Gratuity Form I.doc