Upgrad LLM

transfer of gratuity from old employer to new employer

Hi All, As a new employer, what is the process of transfering gratuity from old employer to me ? An employee of the organization asked me that what will happen to our gratuity if employer is changed ?

Hello Karan Jain,

I shall provide you with what the law stipulates and accordingly the solution to the query raised. So as per my knowledge: 

Section 4 Payment of Gratuity Act, 1972 prescribes as under:

  1. Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years
  1. on his superannuation, or
  2. on his retirement or resignation,
  3. on his death or disablement due to accident or disease.

So, to conclude Gratuity is a terminal benefit payable to an employee based on certain number of years of his continuous and blemish less service under the same employer which is payable on termination and not on transfer. However, if certain sister concerns or subsidiary companies are under the same employer, and conditions of service provides for transfer from one company to another, then only the proportionate contribution of gratuity is transferred.

There is no government order as such, but the Govt. has no objection to transfer the proportionate share of Gratuity from one company to another company if both the companies are under the same group of companies.

Therefore, the question of transfer of gratuity from one employer/establishment to another does not arise normally for the reason that each establishment is a separate legal entity and has got separate legal status.

Hence, from your query it is evident that you are not a sister concern or a subsidiary of the company in which your new employee was, thereby the gratuity is non-transferable.




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