Good evening,
We started a partnership firm in February 2015, and one employee joined in June 2017. The firm had 12 employees until March 2019. In March 2019, instead of converting our partnership firm to a private limited company, we registered a new company with the same name and "Pvt Ltd." appended. We did not issue new offer letters or joining letters to the existing 12 employees from the partnership firm.
Starting from March 2019, all salaries, PF contributions, and health insurance were paid from the private limited company. However, we did not register for gratuity, even after exceeding 15 employees.
Now, in June 2024, the employee who joined in 2017 has resigned and is requesting gratuity since his salary was processed by the private limited company, and he has salary slips and PF records from it. Although he was an employee of the partnership firm since joining and did not receive a new joining letter from the private limited company, he is seeking clarification on the applicability of gratuity.
Could you please advise if gratuity is applicable to him in this scenario?
From India, Pune
Acknowledge(0)
Amend(0)
We started a partnership firm in February 2015, and one employee joined in June 2017. The firm had 12 employees until March 2019. In March 2019, instead of converting our partnership firm to a private limited company, we registered a new company with the same name and "Pvt Ltd." appended. We did not issue new offer letters or joining letters to the existing 12 employees from the partnership firm.
Starting from March 2019, all salaries, PF contributions, and health insurance were paid from the private limited company. However, we did not register for gratuity, even after exceeding 15 employees.
Now, in June 2024, the employee who joined in 2017 has resigned and is requesting gratuity since his salary was processed by the private limited company, and he has salary slips and PF records from it. Although he was an employee of the partnership firm since joining and did not receive a new joining letter from the private limited company, he is seeking clarification on the applicability of gratuity.
Could you please advise if gratuity is applicable to him in this scenario?
From India, Pune
Acknowledge(0)Amend(0)
Unless otherwise communicated to the employees about the service of converting the partnership firm into a company, the joining date of all employees will be the actual joining date in the firm. Therefore, you should pay gratuity to employees who had joined the partnership. Unlike PF and ESI, there is no need to register for gratuity. It is automatic once the number of employees becomes 10.
From India, Kannur
Acknowledge(2)
Amend(0)
4769From India, Kannur
Acknowledge(2)Amend(0)
Hi Madhu - Sorry, I did not understand. For us, the employee is still an employee of the partnership firm, and it has only 4 employees. We have not informed any employees about the conversion from a partnership to a private limited company. Can you please help me understand better?
From India, Pune
Acknowledge(0)Amend(0)
From India, Pune
Acknowledge(0)Amend(0)
It's understood all the employees right from 2015 are continued without a break. Your firm crossed 10 employees from March 2019. Since no termination or relieving of any of your employees was effected throughout, all are deemed to be continued in employment. Whether partnership or company, it did not affect the continuity. The reason being employees have nothing to do with whether it was a partnership or company, as nothing about it was communicated to the employees concerned. Therefore, faults, if any, cannot be attributed to the employees. If the company is not registered under the PoG Act, it is the fault of the company, and the right to gratuity vested in employees under the PoG Act cannot be nullified. Persons who joined in 2017 and resigned in 2024 after completing 5 years of continuous service are entitled to gratuity.
From India, Bangalore
Acknowledge(0)Amend(0)
From India, Bangalore
Acknowledge(0)Amend(0)
The Payment of Gratuity Act, 1972 applies to establishments with 10 or more employees working in factories, mines, oil fields, plantations, ports, railways, motor transport undertakings, and shops & commercial establishments.
The partnership firms are not an exception, but the act squarely applies to establishments that have 10 or more employees working.
From India, Mumbai
Acknowledge(0)Amend(0)
The partnership firms are not an exception, but the act squarely applies to establishments that have 10 or more employees working.
From India, Mumbai
Acknowledge(0)Amend(0)
Mr. Sharma,
You had a partnership company in which you had some staff (4 people). Then you had a private limited company and started paying people from there. It does not matter if you formally intimate or not, since you are paying the employee from the Pvt Ltd company, he is working for it. Since the company has more than 10 employees, it is covered under the Gratuity Act.
Since the ownership was the same and no termination was issued or involved, the period counts from the time when the employee joined the partnership firm, unless you have a specific break of service. The courts will reject your contention of the service being different as it is clear that the business and promoters are the same, and therefore the employee is eligible for gratuity.
From India, Mumbai
Acknowledge(0)Amend(0)
You had a partnership company in which you had some staff (4 people). Then you had a private limited company and started paying people from there. It does not matter if you formally intimate or not, since you are paying the employee from the Pvt Ltd company, he is working for it. Since the company has more than 10 employees, it is covered under the Gratuity Act.
Since the ownership was the same and no termination was issued or involved, the period counts from the time when the employee joined the partnership firm, unless you have a specific break of service. The courts will reject your contention of the service being different as it is clear that the business and promoters are the same, and therefore the employee is eligible for gratuity.
From India, Mumbai
Acknowledge(0)Amend(0)
Payment of gratuity states that establishments with 10 or more employees who have uninterrupted service of 5 years are eligible for gratuity. Even if you have not issued an offer letter, you are supposed to pay the gratuity amount to avoid any legal disputes.
From India, Madras
Acknowledge(0)Amend(0)
From India, Madras
Acknowledge(0)Amend(0)Engage with peers to discuss and resolve work and business challenges collaboratively - share and document your knowledge. Our AI-powered platform, features real-time fact-checking, peer reviews, and an extensive historical knowledge base. - Join & Be Part Of Our Community.
FORM-F-NOMINATI ON OF GRATUITY.pdf
Gratuity Form I.doc
Madhu.T.K
Described well