Respected All,
I am working on a contract basis in a manufacturing company through a contractor. I have a query in my mind: Is an employee eligible to receive the gratuity amount if they work continuously for five years with the same contractor? Is the contractor liable to pay a gratuity amount to that employee? What if the contractor denies paying the same? I would greatly appreciate your valuable reply.
Thanks
From India, Noida
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I am working on a contract basis in a manufacturing company through a contractor. I have a query in my mind: Is an employee eligible to receive the gratuity amount if they work continuously for five years with the same contractor? Is the contractor liable to pay a gratuity amount to that employee? What if the contractor denies paying the same? I would greatly appreciate your valuable reply.
Thanks
From India, Noida
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Dear friend,
Basically, as per the provisions of the Payment of Gratuity Act, 1972, the employer under whom an employee serves for not less than a continuous service of five years is bound to pay him gratuity in case of the employee's termination of employment other than dismissal arising out of any misconduct involving riotous behavior or moral turpitude if the Act is applicable to his establishment. There is no distinction whether he is a contractor or otherwise.
From India, Salem
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6108Basically, as per the provisions of the Payment of Gratuity Act, 1972, the employer under whom an employee serves for not less than a continuous service of five years is bound to pay him gratuity in case of the employee's termination of employment other than dismissal arising out of any misconduct involving riotous behavior or moral turpitude if the Act is applicable to his establishment. There is no distinction whether he is a contractor or otherwise.
From India, Salem
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You are eligible for gratuity if you have worked continuously for 5 years or more.
If the contractor does not pay gratuity, then the principal employer is liable to pay, which the principal employer can recover the amount from the contractor later.
From India, Kolkata
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If the contractor does not pay gratuity, then the principal employer is liable to pay, which the principal employer can recover the amount from the contractor later.
From India, Kolkata
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Dear Mr. Ritesh, If member has worked with different establishment,but same contractor, total service more than 5 yrs, which establishment is responsible to pay Gratuity ? Thanks, Vidyadhar Bhat
From India, Pune
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From India, Pune
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In that case contractor is liable to pay. Responsibility of principal employers come only when the contractor fails to fulfill its obligation.
From India, Kolkata
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From India, Kolkata
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I would like to request Mr. Vidhyadhar to go through my answers to the thread "35 Interesting Questions relating to Contract Labour". Continuous and unblemished service under the same employer is the most essential ingredient for entitlement of gratuity to an employee on the normal termination of his employment. Since contract labour is a system of indirect employment involving the existence of dual or triple layers of employers, even the higher judiciary has divergent views on the ultimate liability to pay gratuity to contract labour.
From India, Salem
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From India, Salem
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Respected All,
Mr. Vidhyadhar Sir rightly raised a query that I also had. Umakanthan Sir responded to Vidhyadhar Sir's query stating that "even the higher Judiciary has different views on the liability to pay gratuity to a contract labour." However, the confusion persists: if the higher judiciary holds different opinions, what is the final answer? Who is ultimately responsible for paying gratuity to contract labourers? What are we expected to do in this case?
From India, Noida
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Mr. Vidhyadhar Sir rightly raised a query that I also had. Umakanthan Sir responded to Vidhyadhar Sir's query stating that "even the higher Judiciary has different views on the liability to pay gratuity to a contract labour." However, the confusion persists: if the higher judiciary holds different opinions, what is the final answer? Who is ultimately responsible for paying gratuity to contract labourers? What are we expected to do in this case?
From India, Noida
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As is rightly put by Resp. Umakantan, irrespective of the number of layers running to the principal employer, for the contract worker, the CONTRACTOR is to be construed as the Principal employer for the purpose of Gratuity, and the worker is to be paid by the contractor alone, whether he is receiving compensation from the company where he is contracted.
Regards
From India, Thane
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Regards
From India, Thane
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Dear RKORE77,
It is my considered and humble opinion that any question of law could be understood and answered in the right perspective only by one's own meticulous reading of all the available judgments, even if contradictory, on the question. That's why I intentionally refrained from providing pinpoint answers to the queries of both Vidhyadhar and yourself.
Now, let us make a brief analysis of the following judgments on the issue as far as known to me:
(1) Cominco Binani Zinc Ltd v. Pappachan [1989 LLR 123 - Kerala High Court]
(2) Madras Fertilizers Ltd v. Controlling Authority under the P.G Act [2003 LLR 244 - Madras High Court]
(3) Mettur Thermal Station v. Appellate Authority under the P.G Act [2012 LLR 1160 - Madras H.C]
In the first case, the questions before the Court were the liability of payment of bonus and gratuity to the contract labor employed in the factory of the Principal Employer. Since the claim was based on the settlement between the contractor and the union of contract labor, the honorable Kerala High Court refused to fasten the liability on the PE as he was not a party to the said settlement based on the narrow interpretation of sec. 21(4) of the CLRA Act, 1970.
In the second case, the honorable Madras High Court undertook a detailed analysis of sec. 21(4) of the CLRA Act with reference to the term "wages" as defined under sec. 2(vi) of the Payment of Wages Act, 1936, particularly elaborately interpreting clause (d) of the definition and ruled that the PE is liable to pay gratuity to the contract labor by virtue of the vicarious liability imposed by the section in case of failure by the contractor.
The third case followed the ratio decidendi of the second case law.
Therefore, the inescapable conclusion is that a contract employee working for a principal employer can stake a strong claim for gratuity directly from the PE at the time of termination of his employment if he is otherwise qualified in the event of the contractor's failure. Since "gratuity" also falls within the ambit of the definition of wages under the PW Act, 1936, and the vicarious liability created by sec. 21(4) of the CLRA Act, 1970 on the PE for payment of wages and other benefits applies to the payment of gratuity too, it is advisable for all the PEs engaging contract labor through manpower agencies and other contractors to include the amount of gratuity in the CTC of the contract labor on an annual/pro rata basis irrespective of the length of service.
From India, Salem
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It is my considered and humble opinion that any question of law could be understood and answered in the right perspective only by one's own meticulous reading of all the available judgments, even if contradictory, on the question. That's why I intentionally refrained from providing pinpoint answers to the queries of both Vidhyadhar and yourself.
Now, let us make a brief analysis of the following judgments on the issue as far as known to me:
(1) Cominco Binani Zinc Ltd v. Pappachan [1989 LLR 123 - Kerala High Court]
(2) Madras Fertilizers Ltd v. Controlling Authority under the P.G Act [2003 LLR 244 - Madras High Court]
(3) Mettur Thermal Station v. Appellate Authority under the P.G Act [2012 LLR 1160 - Madras H.C]
In the first case, the questions before the Court were the liability of payment of bonus and gratuity to the contract labor employed in the factory of the Principal Employer. Since the claim was based on the settlement between the contractor and the union of contract labor, the honorable Kerala High Court refused to fasten the liability on the PE as he was not a party to the said settlement based on the narrow interpretation of sec. 21(4) of the CLRA Act, 1970.
In the second case, the honorable Madras High Court undertook a detailed analysis of sec. 21(4) of the CLRA Act with reference to the term "wages" as defined under sec. 2(vi) of the Payment of Wages Act, 1936, particularly elaborately interpreting clause (d) of the definition and ruled that the PE is liable to pay gratuity to the contract labor by virtue of the vicarious liability imposed by the section in case of failure by the contractor.
The third case followed the ratio decidendi of the second case law.
Therefore, the inescapable conclusion is that a contract employee working for a principal employer can stake a strong claim for gratuity directly from the PE at the time of termination of his employment if he is otherwise qualified in the event of the contractor's failure. Since "gratuity" also falls within the ambit of the definition of wages under the PW Act, 1936, and the vicarious liability created by sec. 21(4) of the CLRA Act, 1970 on the PE for payment of wages and other benefits applies to the payment of gratuity too, it is advisable for all the PEs engaging contract labor through manpower agencies and other contractors to include the amount of gratuity in the CTC of the contract labor on an annual/pro rata basis irrespective of the length of service.
From India, Salem
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I have a question. A contract worker worked for a fixed contract (3 + 3) for 6 years. However, the main contractor engaged two subcontractors, one for 4 years and another for 2 years. What about gratuity? Are there any case laws related to this situation?
From India, Nellore
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From India, Nellore
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