Dear Seniors,
I want to get clarification on Gratuity. Is gratuity applicable for an employee who worked within 2 or 3 group companies? One of my senior employees worked 2.5 years in X, 3 years in Y, and 1.5 years in Z companies, but X, Y, and Z are group companies.
If gratuity is applicable, which company needs to pay the gratuity?
Regards,
John
From India, Madras
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59I want to get clarification on Gratuity. Is gratuity applicable for an employee who worked within 2 or 3 group companies? One of my senior employees worked 2.5 years in X, 3 years in Y, and 1.5 years in Z companies, but X, Y, and Z are group companies.
If gratuity is applicable, which company needs to pay the gratuity?
Regards,
John
From India, Madras
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There is no applicable policy for group companies. For each company, you need to maintain gratuity independently. Additionally, every employee must complete a minimum period of five years to be eligible for gratuity.
From India, New Delhi
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From India, New Delhi
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To my knowledge, I don't think that there is any legal existence for a separate company form of organization called "Group Company". Even though more than one company is owned by the same group of individuals or shareholders, each and every such company is a separate legal entity for all practical purposes unless they have a common balance sheet. Of course, in colloquial parlance, they are called group companies because of the joint ownership of the same group of individuals, normally originating from the same business family.
Therefore, as rightly said by Jagat Kumar, an employee should have completed continuous service of not less than 5 years in a particular company prior to the termination of his employment in that company due to any reason other than death or disability due to accident, to stake his claim for gratuity. This is the normal legal position. However, if there is a common agreement among such companies for inter-company transfer of the services of their employees with continuity of service, the final transferee company would be liable to pay the gratuity of the outgoing employee for the entire cumulative service, even though his actual length of service in that one is less than 5 years.
From India, Salem
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Therefore, as rightly said by Jagat Kumar, an employee should have completed continuous service of not less than 5 years in a particular company prior to the termination of his employment in that company due to any reason other than death or disability due to accident, to stake his claim for gratuity. This is the normal legal position. However, if there is a common agreement among such companies for inter-company transfer of the services of their employees with continuity of service, the final transferee company would be liable to pay the gratuity of the outgoing employee for the entire cumulative service, even though his actual length of service in that one is less than 5 years.
From India, Salem
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Dear John,
Large industrial houses have many separate companies, which are legal entities. On a need basis, management transfers employees from one company to another. In many cases, the employee is required to resign from the first company and receives a fresh appointment letter upon joining the next company within the same Group. Every time the employee changes the payroll of Group Companies, their full and final settlement is done from the company they are leaving. In this regard, two types of practices are prevalent:
1. Gratuity is not transferred from one company to the next. If an employee has completed 5 years of service with one company, they receive gratuity along with their final settlement. If the employee's service is less than 5 years, they are not entitled to any gratuity.
2. Some Groups follow the practice of carrying forward Gratuity and Leave accumulation. In this case, the appointment letter issued by the next company in the Group includes a sentence like this - "for the purpose of gratuity and any other long-term terminal benefits, your service will be treated as continuous from (Date of joining the first company)."
In the scenario you mentioned, if this type of clause exists in the appointment letters issued by subsequent companies, then the concerned employee is eligible for gratuity. If such a clause is absent, then they are not eligible for gratuity.
Furthermore, gratuity is to be paid to the employee by their last employer company in the Group. For accounting purposes, every time the employee changes the payroll, a pro-rata gratuity amount is transferred from the relieving company to the appointing company.
I hope this addresses your query.
Best Wishes,
Indu Wadhwa
Aspiring People
Email: indu.wadhwa@aspiringpeople.in
Phone: 9811513715
From India, New Delhi
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Large industrial houses have many separate companies, which are legal entities. On a need basis, management transfers employees from one company to another. In many cases, the employee is required to resign from the first company and receives a fresh appointment letter upon joining the next company within the same Group. Every time the employee changes the payroll of Group Companies, their full and final settlement is done from the company they are leaving. In this regard, two types of practices are prevalent:
1. Gratuity is not transferred from one company to the next. If an employee has completed 5 years of service with one company, they receive gratuity along with their final settlement. If the employee's service is less than 5 years, they are not entitled to any gratuity.
2. Some Groups follow the practice of carrying forward Gratuity and Leave accumulation. In this case, the appointment letter issued by the next company in the Group includes a sentence like this - "for the purpose of gratuity and any other long-term terminal benefits, your service will be treated as continuous from (Date of joining the first company)."
In the scenario you mentioned, if this type of clause exists in the appointment letters issued by subsequent companies, then the concerned employee is eligible for gratuity. If such a clause is absent, then they are not eligible for gratuity.
Furthermore, gratuity is to be paid to the employee by their last employer company in the Group. For accounting purposes, every time the employee changes the payroll, a pro-rata gratuity amount is transferred from the relieving company to the appointing company.
I hope this addresses your query.
Best Wishes,
Indu Wadhwa
Aspiring People
Email: indu.wadhwa@aspiringpeople.in
Phone: 9811513715
From India, New Delhi
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