If an employer hires an employee on a contract basis and after the end of his contract, there is a one-month gap before entering into a new contract with the same employee year after year, will that employee be eligible for gratuity after five years, considering the one-month gap between contracts?
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6Thank you.
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Dear Friend, Have you settled his previous employment Full and final and what was the PF status ?
From India, Mumbai
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From India, Mumbai
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This will be counted as continuous service. One month in a year of 12 months will not make any difference because he should have worked for 240 days in eleven months. 240 days are the paid days which should include all weekly off days, holidays, and leave days that are paid days. As such, there is no meaning in putting the employee "in break".
We should not be appointing employees just to deny the benefits. Let us think positively and employ people for long service. This will give them a feeling that they are being taken care of by the employer. Gratuity is an amount paid for the long service rendered, and as such, you should have taken the entire benefits that could be taken from an employee. On the other hand, if he is not giving you any benefits, you should have sent him out immediately or not renewed his contract anymore. Better think that he had benefited the company and do not think that he had only made a cost to the company.
From India, Kannur
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We should not be appointing employees just to deny the benefits. Let us think positively and employ people for long service. This will give them a feeling that they are being taken care of by the employer. Gratuity is an amount paid for the long service rendered, and as such, you should have taken the entire benefits that could be taken from an employee. On the other hand, if he is not giving you any benefits, you should have sent him out immediately or not renewed his contract anymore. Better think that he had benefited the company and do not think that he had only made a cost to the company.
From India, Kannur
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Dear Madhu Sir, 1. If the employee was absconding then how his service be continued? 2. If exit date is mentioned in PF then how his service be continued ?
From India, Mumbai
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From India, Mumbai
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Where has this absconding issue come from? If the employee is not reporting, the question of renewal will not arise. When you can exit the employee in the PF, why can't you enter the same employee? A service break in PF will in no way affect his continuity of service for claiming gratuity. An employee who has worked 240 days in 12 months is considered to be in a continuous period. If there is a one-month gap between each renewal, it would only be seen as an artificial interruption of service designed to deny the employees' right to receive gratuity. If this employee is not a supervisory or managerial employee, he can file a case against the employer, treating this as an unfair practice under the Industrial Disputes Act.
I have attached a case that is self-explanatory and applicable to the case mentioned above, i.e., employing individuals on a fixed-term basis and renewing their contracts year after year. Please refer to that as well.
From India, Kannur
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I have attached a case that is self-explanatory and applicable to the case mentioned above, i.e., employing individuals on a fixed-term basis and renewing their contracts year after year. Please refer to that as well.
From India, Kannur
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Dear All,
An employee does not come under PF and ESI as he is on contract providing consultancy services. However, my query is regarding the situation where, after the end of the contract, if he is not available for 1 month and then joins us with a fresh contract yearly, including the same 1-month break, will it be counted as gratuity?
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An employee does not come under PF and ESI as he is on contract providing consultancy services. However, my query is regarding the situation where, after the end of the contract, if he is not available for 1 month and then joins us with a fresh contract yearly, including the same 1-month break, will it be counted as gratuity?
Thank you.
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Mr. Rithveek, in your first post you said, hires an employee on a contract basis, that means you hire him for a reward and make him work for a year. Then, you ask him to go or he goes himself (as you said he is not available for a month) for a month's vacation. After that, he comes back and makes an agreement with you for another year. At the end of the year, he goes for a month-long vacation and comes back to sign another agreement. This is called fixed-term contract employment.
Now you say that he is engaged through a consultancy. Is he himself the consultant, or is he simply sent by the consultant?
He can be excluded from ESI if his remuneration is more than Rs. 21,000. He can be excluded from PF if his salary is more than Rs. 15,000. If the salary is not more than Rs. 21,000, even if he is sent from the consultancy, he should be given ESI. Similarly, if his PF qualifying salary (the salary on which your company deducts PF of other employees) is less than Rs. 15,000, he should be given PF even if he is not under your rolls.
If he has been sent by a consultant, he is a contract worker whose employer is the consultancy company. In that case, there is no need for him to make a contract with you. It should be with the Principal employer, i.e., you and the consultancy.
Another possibility is an independent contractor. An independent contractor is one who takes up work, does it, and returns it. He will not be an employee of yours and can be excluded from ESI, PF, and ultimately gratuity as well. However, an independent contractor does not need to take a gap in between. Why should there be a gap? That is not required. An independent contractor will not follow the office timing, dress code, or be supervised by your people on matters other than the quality of the end products delivered or services rendered. He will not follow your leave rules, and you cannot take any disciplinary action against him other than termination of the contract.
One important point that I want to make is that before posting, make everything clear. When you post the issues very clearly and transparently, we can advise you properly. I have posted so many things here; most of these are not related to you. But I was made to post such things because your question was improper. I am not fully convinced about your query or apprehensions because there are still some grey areas. I am sure that the employee is not an independent contractor but is coming to your office on time, following the leave rules, following the instructions of your personnel, and is subjected to disciplinary action as per your company policies.
From India, Kannur
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Now you say that he is engaged through a consultancy. Is he himself the consultant, or is he simply sent by the consultant?
He can be excluded from ESI if his remuneration is more than Rs. 21,000. He can be excluded from PF if his salary is more than Rs. 15,000. If the salary is not more than Rs. 21,000, even if he is sent from the consultancy, he should be given ESI. Similarly, if his PF qualifying salary (the salary on which your company deducts PF of other employees) is less than Rs. 15,000, he should be given PF even if he is not under your rolls.
If he has been sent by a consultant, he is a contract worker whose employer is the consultancy company. In that case, there is no need for him to make a contract with you. It should be with the Principal employer, i.e., you and the consultancy.
Another possibility is an independent contractor. An independent contractor is one who takes up work, does it, and returns it. He will not be an employee of yours and can be excluded from ESI, PF, and ultimately gratuity as well. However, an independent contractor does not need to take a gap in between. Why should there be a gap? That is not required. An independent contractor will not follow the office timing, dress code, or be supervised by your people on matters other than the quality of the end products delivered or services rendered. He will not follow your leave rules, and you cannot take any disciplinary action against him other than termination of the contract.
One important point that I want to make is that before posting, make everything clear. When you post the issues very clearly and transparently, we can advise you properly. I have posted so many things here; most of these are not related to you. But I was made to post such things because your question was improper. I am not fully convinced about your query or apprehensions because there are still some grey areas. I am sure that the employee is not an independent contractor but is coming to your office on time, following the leave rules, following the instructions of your personnel, and is subjected to disciplinary action as per your company policies.
From India, Kannur
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Dear Madhu,
Thank you for your in-depth explanation. However, he himself chose to go for a month for some reasons, and that doesn't fulfill the continuous service point. Neither was it mentioned in his contract that he will be provided a one-month vacation. Also, in the contract, it was mentioned that the contract will be deemed to be ended automatically once the contract end date approaches.
Secondly, their timings and leave structure are totally different from regular employees.
Now, I actually want to ask this question because due to some reasons, management has decided to devise a pool of persons who should be given a good salary but will be isolated from statutory, gratuity, and other benefits. Everything is clearly mentioned in the contract and clearly discussed with the person as well. However, I need your consent to implement it properly on the ground.
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Thank you for your in-depth explanation. However, he himself chose to go for a month for some reasons, and that doesn't fulfill the continuous service point. Neither was it mentioned in his contract that he will be provided a one-month vacation. Also, in the contract, it was mentioned that the contract will be deemed to be ended automatically once the contract end date approaches.
Secondly, their timings and leave structure are totally different from regular employees.
Now, I actually want to ask this question because due to some reasons, management has decided to devise a pool of persons who should be given a good salary but will be isolated from statutory, gratuity, and other benefits. Everything is clearly mentioned in the contract and clearly discussed with the person as well. However, I need your consent to implement it properly on the ground.
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Dear Ravi,
His full and final settlement was made, and his salary is above 50k; therefore, PF and ESI are not deducted. He is only being given casual leave, so no PL encashment will be provided. Just the salary in full and final settlement or any dues if remaining.
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His full and final settlement was made, and his salary is above 50k; therefore, PF and ESI are not deducted. He is only being given casual leave, so no PL encashment will be provided. Just the salary in full and final settlement or any dues if remaining.
Thank you.
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It is immaterial what the type of contract you enter into is. If he is doing work similar to others, he is an employee only. In the case of Wockhardt Hospital Vs COT, Hyderabad, the Consultant Doctors were asked to pay income tax treating the remuneration the hospital pays them as professional charges, as Salary.
You can make a contract with any person who does not fall under the Labour Acts like the Industrial Disputes Act, Minimum Wages Act, Payment of Wages Act, Bonus Act, or Standing Order Act, but you cannot exempt them from the Payment of Gratuity Act. A person working for you should be an employee regardless of the name he is called. Any contract you make will be void abinitio if it deviates from the general law.
You can have two or three leave rules, each applicable to different categories of people, provided they meet the minimum requirements under the relevant Act. For example, if it is a factory, it should comply with the Factories Act, and if it is a commercial establishment, it should adhere to the state Shops and Commercial Establishments Act. Different timings can be set for different categories of employees, but that will not make any difference. There are other tests to prove the master-servant relationship. You cannot solely rely on Consultants to run the show, and independent contractors cannot be used for work of a perennial nature.
Returning to the applicability of the Gratuity Act to your so-called employee who takes a one-month gap and signs another contract, if it is established that he worked for 240 days each year, he should be entitled to gratuity even if there is an agreement stating that he will not demand gratuity at the end of his service. This is because such an agreement is completely illegal.
From India, Kannur
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You can make a contract with any person who does not fall under the Labour Acts like the Industrial Disputes Act, Minimum Wages Act, Payment of Wages Act, Bonus Act, or Standing Order Act, but you cannot exempt them from the Payment of Gratuity Act. A person working for you should be an employee regardless of the name he is called. Any contract you make will be void abinitio if it deviates from the general law.
You can have two or three leave rules, each applicable to different categories of people, provided they meet the minimum requirements under the relevant Act. For example, if it is a factory, it should comply with the Factories Act, and if it is a commercial establishment, it should adhere to the state Shops and Commercial Establishments Act. Different timings can be set for different categories of employees, but that will not make any difference. There are other tests to prove the master-servant relationship. You cannot solely rely on Consultants to run the show, and independent contractors cannot be used for work of a perennial nature.
Returning to the applicability of the Gratuity Act to your so-called employee who takes a one-month gap and signs another contract, if it is established that he worked for 240 days each year, he should be entitled to gratuity even if there is an agreement stating that he will not demand gratuity at the end of his service. This is because such an agreement is completely illegal.
From India, Kannur
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(Fact Checked)-The user's reply contains accurate information regarding the eligibility for gratuity based on the scenario described. The explanation provided aligns with the Payment of Gratuity Act and general labor laws. (1 Acknowledge point)
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As per your posting, I am failed to understand of whom you are talking. Is the person is a Consultant or Employee? Gratuity is not applicable to a consultant but applicable to an employee.
An employee on fixed term employment is eligible for “Gratuity” even though not completed qualifying period at prorate basis for the service rendered.
Gazette notification of Amendment on Industrial Standing Orders is attached for reference.
From India, Mumbai
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An employee on fixed term employment is eligible for “Gratuity” even though not completed qualifying period at prorate basis for the service rendered.
Gazette notification of Amendment on Industrial Standing Orders is attached for reference.
From India, Mumbai
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(Fact Checked)-The user reply is correct. The distinction between consultants and employees regarding gratuity eligibility is accurate. The mention of prorate basis for fixed-term employment aligns with relevant laws. (1 Acknowledge point)
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The above notification enables all employers to hire employees for fixed terms and is meant for the payment of gratuity. This notification allows employers with certified standing orders to include a specific category of workers, namely Fixed Term Contract Workers, for a fixed term. Initially, this option was only available to employers in the apparel manufacturing sector but has now been extended to any industry, allowing employers to hire and terminate employees as needed. To appease the Unions, clauses have been included such as ensuring payment of remuneration and other statutory contributions equal to those of permanent workers, as well as payment of gratuity if the worker's term is not renewed and they are terminated before completing 5 years. This scope is limited and applies only to establishments with standing orders.
From India, Kannur
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From India, Kannur
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Good evening Mr. Madhu, Thanks for prompt remark and shading additional light upon the topic.
From India, Mumbai
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From India, Mumbai
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Dear All,
Our organization is a school that comes under Shiksha Samiti or a trust, and we are hiring professional coaches in various fields on contracts. We need all of your advice on this, especially regarding gratuity as they work for 4 hours a day. Their contract can be made either as a consultant in sports or as a professional fee.
Thank you.
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Our organization is a school that comes under Shiksha Samiti or a trust, and we are hiring professional coaches in various fields on contracts. We need all of your advice on this, especially regarding gratuity as they work for 4 hours a day. Their contract can be made either as a consultant in sports or as a professional fee.
Thank you.
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(Fact Checked)-The employee may be eligible for gratuity after 5 years as continuous service includes a 1-month break. Contracts should align with labor laws. (1 Acknowledge point)
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This subject was discussed in length in various other threads also. A school has a curriculum, and sports are also included in it. Your students get trained in sports only as part of studies, but sports are not their primary objective. I don't think that you will take your children to the ground during March or examination is going on.
Now, like any other faculty member, a trainer is to be employed following the education rule of the state. This is to be followed even if you are an unaided school, i.e., a school that does not take financial assistance from the government. It is immaterial whether you employ him for the entire day of 8 hours or only for 4 hours a day. In these 4 hours, he has to follow a set of rules, time schedules, and follow a dress code, etc. In such circumstances, his status is just like a teacher. How can he be called a Consultant or Professional?
It is true if he comes every day and gives instructions to one or two of your teachers as to how to give physical education to the students. In such cases, the fees that he collects are professional charges. On the other hand, if he comes to your school at 9.30 am and gives training to the students as per a pre-designed schedule and leaves at 1.30 pm, he is just like an employee or a part-time employee. He should be paid a salary, be subjected to PF and ESI, and finally when he leaves the school (after rendering the qualifying service), the school pays him gratuity. Since everything is linked to the salary, which in turn is also linked to hours worked, whatever to pay will be lesser than that payable to full-time teachers.
From India, Kannur
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Now, like any other faculty member, a trainer is to be employed following the education rule of the state. This is to be followed even if you are an unaided school, i.e., a school that does not take financial assistance from the government. It is immaterial whether you employ him for the entire day of 8 hours or only for 4 hours a day. In these 4 hours, he has to follow a set of rules, time schedules, and follow a dress code, etc. In such circumstances, his status is just like a teacher. How can he be called a Consultant or Professional?
It is true if he comes every day and gives instructions to one or two of your teachers as to how to give physical education to the students. In such cases, the fees that he collects are professional charges. On the other hand, if he comes to your school at 9.30 am and gives training to the students as per a pre-designed schedule and leaves at 1.30 pm, he is just like an employee or a part-time employee. He should be paid a salary, be subjected to PF and ESI, and finally when he leaves the school (after rendering the qualifying service), the school pays him gratuity. Since everything is linked to the salary, which in turn is also linked to hours worked, whatever to pay will be lesser than that payable to full-time teachers.
From India, Kannur
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if he/she completed 4 years and 240 days , he / she is eligible for gratuity.
From India, Gurgaon
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From India, Gurgaon
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Dear All, At the end of every year his full n final settlement is being made, Will he still gets gratuity ?
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(Fact Checked)-The employee will still be eligible for gratuity after 5 years of continuous service, even with a 1-month gap between contracts. Full & final settlement doesn't affect gratuity entitlement. (1 Acknowledge point)
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Hi Rithveek,
You want to break the contract on a yearly basis and give a considerable break every year. You are also clearing FFS on a yearly basis to avoid statutory commitments like gratuity. But again, you are seeking the services of the same employee. Why? Is it due to a lack of qualified candidates for the said position, or is the company happy with the services of the said employee? Instead, you can regularize the employment of the said employee and give him all statutory benefits like PF, ESI, Bonus, Gratuity, etc., so that the morale of the employee will also be very high, and you can expect more performance.
From India, Madras
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You want to break the contract on a yearly basis and give a considerable break every year. You are also clearing FFS on a yearly basis to avoid statutory commitments like gratuity. But again, you are seeking the services of the same employee. Why? Is it due to a lack of qualified candidates for the said position, or is the company happy with the services of the said employee? Instead, you can regularize the employment of the said employee and give him all statutory benefits like PF, ESI, Bonus, Gratuity, etc., so that the morale of the employee will also be very high, and you can expect more performance.
From India, Madras
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(Fact Checked)-The user's response is correct. It emphasizes the importance of regularizing employment to provide statutory benefits and boost employee morale. (1 Acknowledge point)
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If he has a service of at least 5 years, he will get gratuity.
From India, Kannur
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From India, Kannur
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Dear Rithveek,
When I have gone through all answers of Mr. Madhu, this question arises in my mind: when an employee has received and accepted Full and Final Settlement every time, how can we consider that he is in continuous service? Once he has signed the Full and Final settlement and received the money via cheque, how can he prove that he is in continuous service...? The acceptance of Full and Final settlement signifies the end of the Employer and Employee relationship in my opinion.
I request Mr. Madhu to please clarify.
Regards,
Manish Bali
From India, Delhi
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When I have gone through all answers of Mr. Madhu, this question arises in my mind: when an employee has received and accepted Full and Final Settlement every time, how can we consider that he is in continuous service? Once he has signed the Full and Final settlement and received the money via cheque, how can he prove that he is in continuous service...? The acceptance of Full and Final settlement signifies the end of the Employer and Employee relationship in my opinion.
I request Mr. Madhu to please clarify.
Regards,
Manish Bali
From India, Delhi
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I don't know what Mr. Manish wants to convey. Full and Final Service and Continuous service - are they in any way related? An employee who does not have continuous service is also eligible for F&F. F&F only means the settlement of his unpaid salary, travel bills, etc., and it has nothing to do with continuous service. Therefore, after accepting the F&F, if he files a complaint before the appropriate authority for the recovery of gratuity (I think the matter is related to the payment of gratuity), then the employer cannot say that he has already accepted the full and final settlement and he cannot raise the issue again. This is because the payment of gratuity is the responsibility of the employer, and even if the employee has not demanded it, if he is eligible, the employer has the obligation to contact the left employee and pay the gratuity amount to him.
Let me take it like F&F on the expiry of each contract. So what? F&F only reflects the settlement of dues other than gratuity. For the purpose of gratuity, the service at each spell will be counted, and if each year has 240 days of working, he should get gratuity even if he has signed F&F at the end of each service contract period.
From India, Kannur
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Let me take it like F&F on the expiry of each contract. So what? F&F only reflects the settlement of dues other than gratuity. For the purpose of gratuity, the service at each spell will be counted, and if each year has 240 days of working, he should get gratuity even if he has signed F&F at the end of each service contract period.
From India, Kannur
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Madhu ji, the employee has not completed 5 years in one term (let's say 4.1 years). The employee has taken Full and Final settlement and accepted the same, then left the company. The employer called him back after a one or two-month gap. After accepting the Full and Final settlement, how can the employee claim gratuity if they have not completed 5 years?
The employer could argue that since the employee accepted the Full and Final settlement and did not complete 5 years, they are not eligible for gratuity based on the definition of "Continuous service." This is why I asked.
Thank you.
From India, Delhi
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The employer could argue that since the employee accepted the Full and Final settlement and did not complete 5 years, they are not eligible for gratuity based on the definition of "Continuous service." This is why I asked.
Thank you.
From India, Delhi
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(Fact Checked)-The employee can be eligible for gratuity if the gap between contracts doesn't exceed 1 month. Acceptance of F&F doesn't impact gratuity eligibility. Thank you for seeking clarification on this matter. (1 Acknowledge point)
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This is reemployment and not merely a break in service. Obviously, in such cases, the gratuity will not be payable. But if the operational system itself dictates that a person will be hired for one year and after that, he is asked to stay away for a month before being asked to rejoin, then the gap will be considered artificial.
From India, Kannur
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From India, Kannur
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(Fact Checked)-The user reply is accurate. The concept of reemployment in this scenario where the gap between contracts is artificial does not break the continuous service for gratuity eligibility. (1 Acknowledge point)
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The information you have posted is very useful. The sites you have referred to were good. Thanks for sharing.
Shell Shockers
From Vietnam, Hanoi
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Shell Shockers
From Vietnam, Hanoi
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Dear All,
I have gone through the whole thread and realized that the emphasis of the worth members is on "break in service". Please understand that as per gratuity act "break in service" is allowed with certain terms. To make it further clear we have to look into the definition of "Continuous Service" in the Act:-
2A. Continuous Service.- (1) For the purpose of this Act-
(1) An employee shall be said to be in continuous service for a period if he has, for that period, been in uninterrupted service, including service which may be interrupted on account of sickness, accident, leave, absence from duty without leave (not being absence in respect of which an order treating the absence as break in service has been passed in accordance with the standing orders, rules or regulations governing the employees of the establishment), lay-off, strike or a lock-out or cessation of work not due to any fault of the employee, whether such uninterrupted or interrupted service was rendered before or after the commencement of this Act;
(2) Where an employee (not being an employee employed in a seasonal establishment) is not in continuous service within the meaning of clause (1), for any period of one year or six months, he shall be deemed to be in continuous service under the employer-
(a) for the said period of one year, if the employee during the period of twelve calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than-
(i) one hundred and ninety days, in the case of an employee employed below the ground in a mine or in an establishment which works for less than six days in a week; and
(ii) two hundred and forty days, in any other case:
(b) for the said period of six months if the employee during the period of six calendar months preceding the date with reference to which the calculation is to be made, has actually worked under the employer for not less than-
(i) ninety-five days, in the case of an employee employed below the ground in a mine or in an establishment which works for less than six days in a week; and
(ii) one hundred and twenty days, in any other case;
1[Explanation.- For the purpose of clause (2), the number of days on which an employee has actually worked under an employer shall include the days on which-
(i) he has been laid-off under an agreement or as permitted by standing orders made under the Industrial Employment (Standing Orders) Act, 1946 (20 of 1946), or under the Industrial Disputes Act, 1947 (14 of 1947), or under any other law applicable to the establishment;
(ii) he has been on leave with full wages, earned in the previous year;
(iii) he has been absent due to temporary disablement caused by
accident arising out of and in the course of his employment; and
(iv) in the case of a female, she has been on maternity leave; so,
however, that the total period of such maternity leave does not
exceed twelve weeks].
(3) Where an employee, employed in a seasonal establishment, is not in continuous service within the meaning of clause (1), for any period of one year or six months, he shall be deemed to be in continuous service under the employer for such period if he has actually worked for not less than seventy-five per cent of the number of days on which the establishment was in operation during such period.]
Now lets come to the issue at hand. If the person has taken full and final each year and again engaged right after a few days (be it 1 month or even 2 for that matter) then it may be argued that it is being done to evade the otherwise due applicability of gratuity payment to that employee. Please note he has to show that he worked only for 240 days in each year of service for 5 years, which as per you he did. Untill there is a gap of a full year between those 5 years you cannot say that his services were not continuous. Also untill his full and final consists of Payment of Gratuity as well, you cannot deprive the employee of his statutory right of gratuity and that reminds me of a cardinal and very important principal of legal jurisprudence that what cannot be done directly cannot be done indirectly either. You cannot deprive someone of their statutory right. A statutory right cannot be given away by even signing any contract. There is a protection under Law against it. Also the person follows the rules of your school he is an employee and covered under the definition of employee as given below:-
2 (e) “employee” means any person (other than an apprentice) who is employed for wages, whether the terms of such employment are
express or implied, in any kind of work, manual or otherwise, in
or in connection with the work of a factory, mine, oilfield, plantation, port, railway company, shop or other establishment
to which this Act applies, but does not include any such person
who holds a post under the Central Government or a State Government and is governed by any other Act or by any rules
providing for payment of gratuity;
As per the definition which is very wide any person employed for wages is entitled to get the Gratuity. Hence it would be advisable to pay him gratuity.
From India, New Delhi
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I have gone through the whole thread and realized that the emphasis of the worth members is on "break in service". Please understand that as per gratuity act "break in service" is allowed with certain terms. To make it further clear we have to look into the definition of "Continuous Service" in the Act:-
2A. Continuous Service.- (1) For the purpose of this Act-
(1) An employee shall be said to be in continuous service for a period if he has, for that period, been in uninterrupted service, including service which may be interrupted on account of sickness, accident, leave, absence from duty without leave (not being absence in respect of which an order treating the absence as break in service has been passed in accordance with the standing orders, rules or regulations governing the employees of the establishment), lay-off, strike or a lock-out or cessation of work not due to any fault of the employee, whether such uninterrupted or interrupted service was rendered before or after the commencement of this Act;
(2) Where an employee (not being an employee employed in a seasonal establishment) is not in continuous service within the meaning of clause (1), for any period of one year or six months, he shall be deemed to be in continuous service under the employer-
(a) for the said period of one year, if the employee during the period of twelve calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than-
(i) one hundred and ninety days, in the case of an employee employed below the ground in a mine or in an establishment which works for less than six days in a week; and
(ii) two hundred and forty days, in any other case:
(b) for the said period of six months if the employee during the period of six calendar months preceding the date with reference to which the calculation is to be made, has actually worked under the employer for not less than-
(i) ninety-five days, in the case of an employee employed below the ground in a mine or in an establishment which works for less than six days in a week; and
(ii) one hundred and twenty days, in any other case;
1[Explanation.- For the purpose of clause (2), the number of days on which an employee has actually worked under an employer shall include the days on which-
(i) he has been laid-off under an agreement or as permitted by standing orders made under the Industrial Employment (Standing Orders) Act, 1946 (20 of 1946), or under the Industrial Disputes Act, 1947 (14 of 1947), or under any other law applicable to the establishment;
(ii) he has been on leave with full wages, earned in the previous year;
(iii) he has been absent due to temporary disablement caused by
accident arising out of and in the course of his employment; and
(iv) in the case of a female, she has been on maternity leave; so,
however, that the total period of such maternity leave does not
exceed twelve weeks].
(3) Where an employee, employed in a seasonal establishment, is not in continuous service within the meaning of clause (1), for any period of one year or six months, he shall be deemed to be in continuous service under the employer for such period if he has actually worked for not less than seventy-five per cent of the number of days on which the establishment was in operation during such period.]
Now lets come to the issue at hand. If the person has taken full and final each year and again engaged right after a few days (be it 1 month or even 2 for that matter) then it may be argued that it is being done to evade the otherwise due applicability of gratuity payment to that employee. Please note he has to show that he worked only for 240 days in each year of service for 5 years, which as per you he did. Untill there is a gap of a full year between those 5 years you cannot say that his services were not continuous. Also untill his full and final consists of Payment of Gratuity as well, you cannot deprive the employee of his statutory right of gratuity and that reminds me of a cardinal and very important principal of legal jurisprudence that what cannot be done directly cannot be done indirectly either. You cannot deprive someone of their statutory right. A statutory right cannot be given away by even signing any contract. There is a protection under Law against it. Also the person follows the rules of your school he is an employee and covered under the definition of employee as given below:-
2 (e) “employee” means any person (other than an apprentice) who is employed for wages, whether the terms of such employment are
express or implied, in any kind of work, manual or otherwise, in
or in connection with the work of a factory, mine, oilfield, plantation, port, railway company, shop or other establishment
to which this Act applies, but does not include any such person
who holds a post under the Central Government or a State Government and is governed by any other Act or by any rules
providing for payment of gratuity;
As per the definition which is very wide any person employed for wages is entitled to get the Gratuity. Hence it would be advisable to pay him gratuity.
From India, New Delhi
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(Fact Checked)-The user reply is correct based on the definition of continuous service provided in the Payment of Gratuity Act. The employee would be eligible for gratuity if the service is continuous for 5 years, even with a gap of 1 month between contracts. (1 Acknowledge point)
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Judgment of the Supreme Court rendered under the provisions of the Industrial Dispute Act in Surendra Kumar Verma vs. Central Govt. Industrial Tribunal, [(1980) (4) S.C.C.433)], states that if any person worked 240 days in a year, that will be assumed as a whole year. As the definition of continuous service in the Industrial Dispute Act and Payment of Gratuity Act are the same, the same principle can be adopted under the act. Hence, an employee rendering service of 4 years, 10 months, and 11 days is considered to have completed 5 years of continuous service under sec.4(2), making them eligible for gratuity.
From India, Ghaziabad
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From India, Ghaziabad
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(Fact Checked)-The user reply is correct based on the Supreme Court judgement in Surendra Kumar Verma vs. Central Govt. Industrial Tribunal, [(1980) (4) S.C.C.433)]. The interpretation of continuous service aligns with both the Industrial Dispute Act and the Payment of Gratuity Act. (1 Acknowledge point)
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If a contract employee is hired for a year and the contract is terminated after a year, and the same employee is hired again after a month and placed in the services of the same principal employer. This pattern of employment continues for 5 years (5 years of contract service with an intermittent gap of one month between each year and the extended year). The contract employee will be eligible for gratuity if the contract employee quits the service after 5 years or if the contractor terminates their service after 5 years.
From India, Chennai
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From India, Chennai
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(Fact Checked)-The user's reply is correct regarding gratuity eligibility for a contract employee with continuous service of 5 years, including a one-month gap between contracts. (1 Acknowledge point)
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confutation to previous post Rationale : The contract employer is deemed to have continued on those days of gap/break during the stretch of 5 years . senprithvib6
From India, Chennai
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From India, Chennai
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What is a break in service with regard to the payment of the gratuity act? Assuming an employee who joined the service of an employer on 01.01.2015 and resigns from his job and gets relieved on 31.12.2019. During his tenure, he had unauthorized absences from work for not less than an average of 150 days every year (i.e., years 01.01.2015 to 31.12.2015, 01.01.2016 to 31.12.2016, 01.01.2017 to 31.12.2017, 01.01.2018 to 31.12.2018, and 01.01.2019 to 31.12.2019). In this case, he would have attended 210 days per year as against 240 days as contemplated under the Payment of Gratuity Act to constitute "continuous service" for being eligible for gratuity each year.
However, if the employee goes scot-free in as much as the employer simply chooses to condone/warn his absence for each spell of absence, he is eligible for gratuity.
Rationale:
Unless the employee is issued an order to the effect that the days of absence of each spell have been treated as a break in service/service interrupted and thus declare that he has not put in continuous service as per the statute, he is eligible for gratuity on completion of 5 years. Again, before passing such an order, the employer should have an enabling provision either in the certified standing orders applicable to employees or from the long-term settlement if any. This provision should be quoted in the written order being issued to the concerned employee. You are obliged to prove that the employee had unauthorizedly absented from work for such spells as pointed out in the orders should a demand arise from the concerned employee.
Senprithvib6
From India, Chennai
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However, if the employee goes scot-free in as much as the employer simply chooses to condone/warn his absence for each spell of absence, he is eligible for gratuity.
Rationale:
Unless the employee is issued an order to the effect that the days of absence of each spell have been treated as a break in service/service interrupted and thus declare that he has not put in continuous service as per the statute, he is eligible for gratuity on completion of 5 years. Again, before passing such an order, the employer should have an enabling provision either in the certified standing orders applicable to employees or from the long-term settlement if any. This provision should be quoted in the written order being issued to the concerned employee. You are obliged to prove that the employee had unauthorizedly absented from work for such spells as pointed out in the orders should a demand arise from the concerned employee.
Senprithvib6
From India, Chennai
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Amount of gratuity is directly proportional to the tenure of service and also to the last drawn salary. The gratuity is given at the rate of 15 days of the last drawn salary for each year of service. The salary considered for the calculation of gratuity is the last drawn salary, which includes basic pay and dearness allowance. It is typically calculated according to this formula: Last drawn salary (basic salary plus dearness allowance) multiplied by the number of completed years of service multiplied by 15/26. According to this formula, a time period of over six months or more is considered as one year. This means if you have completed five years and seven months of service, the number of years considered would be six years for the calculation of gratuity benefit. On the other hand, if the service period is five years and five months, the gratuity calculation will be considered as five years.
From India, Aizawl
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From India, Aizawl
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(Fact Checked)-The user's reply is [B]correct[/B] in explaining the calculation of gratuity based on the last drawn salary and the completed years of service. No amendments are needed. (1 Acknowledge point)
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Principal Employer is not liable to make Payment of Gratuity to contract worker
From India, Kolkata
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From India, Kolkata
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Sir, I want to know what is the responsibility of stake holder manager for a establishment. Kindly explain me
From India, Chandigarh
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From India, Chandigarh
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(Fact Checked)-The term "stakeholder manager" is not specific. Stakeholders can include employees, customers, suppliers, etc. The responsibilities vary based on stakeholder type. (1 Acknowledge point)
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Contract workers are hired by the contractor, who is the employer for contract workers. Accordingly, contract workers have to work with their employer to meet the eligibility criteria of 5 years as per the Gratuity Act. In the given case, the contractor has changed. Hence, none of the contractors have an obligation to pay the gratuity since they have not completed the minimum eligibility period required under the act.
It may be noted that the employer is liable for the payment of gratuity, and the principal employer has the obligation to ensure payment for the contract workers working on his premises, subject to meeting the eligibility criteria. Some organizations consider the expense towards gratuity payment when calculating the cost of the contract.
From India, Bangalore
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It may be noted that the employer is liable for the payment of gratuity, and the principal employer has the obligation to ensure payment for the contract workers working on his premises, subject to meeting the eligibility criteria. Some organizations consider the expense towards gratuity payment when calculating the cost of the contract.
From India, Bangalore
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If the person has completed 5 years of service in your organization, it is mandatory to give gratuity to the person irrespective of the 1-month gap in the contract.
Hope you find this information useful.
If you have any queries regarding any other labor laws, call me at 8356832404.
From India, Thane
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Hope you find this information useful.
If you have any queries regarding any other labor laws, call me at 8356832404.
From India, Thane
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(Fact Checked)-The user reply is correct. As per the Payment of Gratuity Act, if an employee completes 5 years of continuous service, they are eligible for gratuity regardless of intermittent breaks like a 1-month gap. Thank you for sharing your knowledge. (1 Acknowledge point)
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An employee engaged on contractual terms for one year and thereafter engaged for yet another term of one year after a gap of one month, and again and again being engaged in a similar fashion for the next 3 years and thus, totally the employee has put in five years. The question is whether he is eligible for gratuity on expiry of the 5th year of contractual engagement.
The answer is YES.
Reasons:
The employer finds the employee a value-added resource and feels his continuation in service, regardless of the nature of the contract, is useful to the organization. By giving a break of 30 days before engaging on the same contractual basis for one year again and again, it is glaringly understood and common sense that the employee should forgo statutory benefits like gratuity. In this process, the employer should not lose sight of the fact that continuous service is rendered by the employee as per the PG Act, notwithstanding the break in service of 30 days, which is deemed to be service being computed/continued for the purpose of gratuity. Employers should take these points into consideration rather than resorting to shortcuts and circumventing the law.
Panchsen
P. Senthilkumar
9884009193
From India, Chennai
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The answer is YES.
Reasons:
The employer finds the employee a value-added resource and feels his continuation in service, regardless of the nature of the contract, is useful to the organization. By giving a break of 30 days before engaging on the same contractual basis for one year again and again, it is glaringly understood and common sense that the employee should forgo statutory benefits like gratuity. In this process, the employer should not lose sight of the fact that continuous service is rendered by the employee as per the PG Act, notwithstanding the break in service of 30 days, which is deemed to be service being computed/continued for the purpose of gratuity. Employers should take these points into consideration rather than resorting to shortcuts and circumventing the law.
Panchsen
P. Senthilkumar
9884009193
From India, Chennai
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Dear Mr. Madhu K,
I seek your esteemed guidance.
In a CPSE that is sick and is under closure, all employees are hired on a contract for one year, and in a few cases, for a 3-year fixed-period contract. The initial employment offer letter clearly states that gratuity will not be paid at the end of the contractual term. The contractual employment of these employees has been extended on a yearly basis, and many employees have completed more than 5 years of service without a break, even though the yearly renewal letter states 'on the same terms and conditions.'
Can the payment of gratuity be denied to the employees because the initial offer letter stated that 'you shall not be paid gratuity at the end of your term and the contract extended on 'same terms and conditions'? Furthermore, if a break in service of 5 or 7 working days is given before renewal on the contract each year, will this be legal and construed as a break in continuous service? Can gratuity be denied in such cases?
Thirdly, if a person has worked as a regular employee for 4 years and 5 months, and then with a one-day break (which happens to be a Sunday), is reappointed as a contractual employee for one more year, making the total period 5 years and 5 months with the same employer, can gratuity be claimed?
Thank you.
From India, Delhi
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I seek your esteemed guidance.
In a CPSE that is sick and is under closure, all employees are hired on a contract for one year, and in a few cases, for a 3-year fixed-period contract. The initial employment offer letter clearly states that gratuity will not be paid at the end of the contractual term. The contractual employment of these employees has been extended on a yearly basis, and many employees have completed more than 5 years of service without a break, even though the yearly renewal letter states 'on the same terms and conditions.'
Can the payment of gratuity be denied to the employees because the initial offer letter stated that 'you shall not be paid gratuity at the end of your term and the contract extended on 'same terms and conditions'? Furthermore, if a break in service of 5 or 7 working days is given before renewal on the contract each year, will this be legal and construed as a break in continuous service? Can gratuity be denied in such cases?
Thirdly, if a person has worked as a regular employee for 4 years and 5 months, and then with a one-day break (which happens to be a Sunday), is reappointed as a contractual employee for one more year, making the total period 5 years and 5 months with the same employer, can gratuity be claimed?
Thank you.
From India, Delhi
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First of all, you cannot have any negative agreement; any agreement which prohibits an employee from obtaining a legal right is invalid. Therefore, the clause stating that the first three years of service will not be counted for gratuity will not be maintainable. As such, if he continues for five years, he will be eligible for gratuity.
Secondly, a break of seven days in a twelve-month period will not render the employee ineligible for gratuity. By allowing a 7-day break after each contract term, the employee would naturally have 240 days of service in each period. An employee would qualify for gratuity if they have at least 240 paid days in each twelve-month service period.
Four years and five months of service would make the employee ineligible for gratuity, but if the second spell of contractual employment contributes to 240 days in the last twelve months, in combination with regular employment, he will receive gratuity. This means that changing the employment status by creating an artificial one or two-day break will not affect the employee's eligibility for gratuity.
From India, Kannur
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Secondly, a break of seven days in a twelve-month period will not render the employee ineligible for gratuity. By allowing a 7-day break after each contract term, the employee would naturally have 240 days of service in each period. An employee would qualify for gratuity if they have at least 240 paid days in each twelve-month service period.
Four years and five months of service would make the employee ineligible for gratuity, but if the second spell of contractual employment contributes to 240 days in the last twelve months, in combination with regular employment, he will receive gratuity. This means that changing the employment status by creating an artificial one or two-day break will not affect the employee's eligibility for gratuity.
From India, Kannur
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(Fact Checked)-The user's reply contains accurate information regarding gratuity eligibility despite breaks in service. There is no provision for excluding the first three years for gratuity calculation. The 240-day rule for gratuity eligibility is correctly explained. (1 Acknowledge point)
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Sir,
No issue. All contract employees who are continued for the consecutive year are perfectly eligible for Gratuity. Even PF ESI remittances have a gap of one month or two months, no issue. Dues of EPF ESI can be offered by the individual worker with the worker's contribution and matching Employer's contribution without the intervention of management.
If the contractor troubles those workers for renewing EPF ESI INDIVIDUAL ACCOUNTS, THEY CAN TAKE LEGAL PROTECTION FROM LABOUR DEPT. AND ESI EPF DEPTS TO CONVINCE THE MANAGEMENT CONTRACTOR AMICABLY.
FOR PAYMENT OF GRATUITY IF THE CONTRACTOR DENIES OR FAILS TO PAY, THEN THE PRINCIPAL EMPLOYER IS LIABLE TO PAY GRATUITY DUES OF EACH WORKER. THE P.E. CAN RECOVER THOSE PAID GRATUITY AMOUNTS FROM THE PAYING CONTRACT BILLS IN THE FUTURE.
From India, Nellore
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No issue. All contract employees who are continued for the consecutive year are perfectly eligible for Gratuity. Even PF ESI remittances have a gap of one month or two months, no issue. Dues of EPF ESI can be offered by the individual worker with the worker's contribution and matching Employer's contribution without the intervention of management.
If the contractor troubles those workers for renewing EPF ESI INDIVIDUAL ACCOUNTS, THEY CAN TAKE LEGAL PROTECTION FROM LABOUR DEPT. AND ESI EPF DEPTS TO CONVINCE THE MANAGEMENT CONTRACTOR AMICABLY.
FOR PAYMENT OF GRATUITY IF THE CONTRACTOR DENIES OR FAILS TO PAY, THEN THE PRINCIPAL EMPLOYER IS LIABLE TO PAY GRATUITY DUES OF EACH WORKER. THE P.E. CAN RECOVER THOSE PAID GRATUITY AMOUNTS FROM THE PAYING CONTRACT BILLS IN THE FUTURE.
From India, Nellore
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I wonder why many HR professionals are asking on this platform how to escape payments under eligible labor laws and how to make employees ineligible for gratuity payments. Many HR professionals are requesting to favor managements by claiming that they have saved some amounts by following these practices.
This is very clear... instance.
First, I am stating that all contract laborers are eligible for ESI and EPF. It is a statutory duty of the contractor as well as a possible Permanent Establishment (P.E.).
Secondly, no contract laborer should leave their job for a month or so willingly unless there is pressure from the contractor and management. You do not want any risks from the workers' side. So, considering ways to escape gratuity payments to innocent workers, regardless of their designation, may not be ethical. The intention is evidently known to all.
Let's focus on following the laws of the land under labor Acts.
From India, Nellore
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This is very clear... instance.
First, I am stating that all contract laborers are eligible for ESI and EPF. It is a statutory duty of the contractor as well as a possible Permanent Establishment (P.E.).
Secondly, no contract laborer should leave their job for a month or so willingly unless there is pressure from the contractor and management. You do not want any risks from the workers' side. So, considering ways to escape gratuity payments to innocent workers, regardless of their designation, may not be ethical. The intention is evidently known to all.
Let's focus on following the laws of the land under labor Acts.
From India, Nellore
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(Fact Checked)-[response] (1 Acknowledge point)
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Here, views and discussions are based on Acts word by word, like a moving encyclopedia. My views are based on ground reality and what is happening in practice. Therefore, my words may not be suited or sugar-coated for many. In my view, every person, from worker to employer, should respect the relevant labor laws applicable. Unfair labor practices lead to dissatisfaction among the working community. That's why newly launched mega factories often close within two years of operation. I suggest that we all encourage good behavior in following labor laws among management and workers.
From India, Nellore
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From India, Nellore
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Fixed Term Contract Employees to get Gratuity.docx
Gratuity notification amendment in definition of employees.pdf
CiteHR.AI
(Fact Checked)-The employee may still be eligible for gratuity despite the one-month gap between contracts. Consult relevant labor laws for specific eligibility criteria. (1 Acknowledge point)