Hi all,
I would like to get one clarification from you: whether the contract labour is eligible for gratuity after completion of 5 years of service. In case they are eligible, and if the subcontractor is not paying the gratuity to the contract employee, will the principal employer be held responsible? Your views, please.
Regards,
R. Sudhakar
From India, Bangalore
I would like to get one clarification from you: whether the contract labour is eligible for gratuity after completion of 5 years of service. In case they are eligible, and if the subcontractor is not paying the gratuity to the contract employee, will the principal employer be held responsible? Your views, please.
Regards,
R. Sudhakar
From India, Bangalore
All employees are eligible for gratuity. The principal employer is liable for all statutory liabilities if the contractor does not pay. It is applicable for gratuity as well. However, the principal employer can recover from the concerned contractor if any money is due to the contractor.
From India, Chennai
From India, Chennai
Dear Sudhakar,
Generally, in practice, one doesn't come across such cases; as 5 years is a long time to keep one continuously on contract; and as per the CLA & R Act; such contract labourers would have sought regular employment with the PE.
Warm regards.
From India, Delhi
Generally, in practice, one doesn't come across such cases; as 5 years is a long time to keep one continuously on contract; and as per the CLA & R Act; such contract labourers would have sought regular employment with the PE.
Warm regards.
From India, Delhi
Neither the Contract Labour Act nor the Gratuity Act provides any rules stating that gratuity must be paid by or reimbursed by the principal employer. This issue has been observed in many places. As per the law, the contractor is responsible for paying gratuity as the direct employer of the worker. However, they show no interest in fulfilling this obligation. The principal employer is also unwilling to make the payment as there are no regulations mandating it. Unfortunately, no employer seems keen on offering more than what is stipulated by law.
From India, Mumbai
From India, Mumbai
Dear Sudhakar,
An employee who has worked for 5 years continuously will be eligible for gratuity. In your case, if the contractor denies to pay, the principal employer can't be held responsible.
Regards
From India, Delhi
An employee who has worked for 5 years continuously will be eligible for gratuity. In your case, if the contractor denies to pay, the principal employer can't be held responsible.
Regards
From India, Delhi
Dear All,
The question "Can a Principal employer be held responsible for non-payment of Gratuity by his contractor?"
Principal employer simply cannot escape from the liability if the aggrieved workman/employee makes him a party to the dispute. There is a judgment, viz. 2003-I-LLJ-854 (MADRAS FERTILIZERS LTD VS CONTROLLING AUTHORITY UNDER PG ACT & OTHERS) by Justice V.S. SIRPURKAR where it was held that it is the responsibility of the Principal Employer to pay the gratuity of contract worker subject to recovery from the contractor later if the workman/employee becomes eligible for payment of gratuity as per the Act.
Shailsh Parikh
Vadodara, Gujarat
99 98 97 10 65
From India, Mumbai
The question "Can a Principal employer be held responsible for non-payment of Gratuity by his contractor?"
Principal employer simply cannot escape from the liability if the aggrieved workman/employee makes him a party to the dispute. There is a judgment, viz. 2003-I-LLJ-854 (MADRAS FERTILIZERS LTD VS CONTROLLING AUTHORITY UNDER PG ACT & OTHERS) by Justice V.S. SIRPURKAR where it was held that it is the responsibility of the Principal Employer to pay the gratuity of contract worker subject to recovery from the contractor later if the workman/employee becomes eligible for payment of gratuity as per the Act.
Shailsh Parikh
Vadodara, Gujarat
99 98 97 10 65
From India, Mumbai
I have a different opinion from what Swanswantbanejee has said. Contract Labour Act is an Act to 'regulate and abolish' engagement of contract labour. As such the Act is intended to reduce the practice of engaging workmen through a contractor and thereby disallowing the benefits to be paid to workmen as per various labour laws in force. In the absence of a specific law all employers will engage workmen through an intermediary and will say that the workmen who actually work for them are not their employees and we have nothing to do with their statutory liabilities. This has been very categorically stated in a very recent judgement of our Apex Court in Bhilwara Dugdh Utpadak Sahakari S. Ltd. Vs. Vinod Kumar Sharma Dead by LRS & Ors and the following sentences of the judgement are noteworthy.
“in order to avoid their liability under various labour statutes employers are very often resorting to subterfuge by trying to show that their employees are, in fact, the employees of a contractor. It is high time that this subterfuge must come to an end. Labour statutes were meant to protect the employees/workmen because it was realised that the employers and the employees are not on an equal bargaining position.
Hence, protection of employees was required so that they may not be exploited. However, this new technique of subterfuge has been adopted by some employers in recent years in order to deny the rights of the workmen under various labour statutes by showing that the concerned workmen are not their employees but are the employees/workmen of a contractor, or that they are merely daily wage or short term or casual employees when in fact they are doing the work of regular employees” The judgement also hints that “globalization/liberalization in the name of growth cannot be at the human cost of exploitation of workers”
The above judgement is expected to be a landmark judgement. Therefore, if the contractor is not paying the gratuity to his employee(s) the principal employer cannot escape from his liability. Please find the attached judgement also.
Regards,
Madhu.T.K
From India, Kannur
“in order to avoid their liability under various labour statutes employers are very often resorting to subterfuge by trying to show that their employees are, in fact, the employees of a contractor. It is high time that this subterfuge must come to an end. Labour statutes were meant to protect the employees/workmen because it was realised that the employers and the employees are not on an equal bargaining position.
Hence, protection of employees was required so that they may not be exploited. However, this new technique of subterfuge has been adopted by some employers in recent years in order to deny the rights of the workmen under various labour statutes by showing that the concerned workmen are not their employees but are the employees/workmen of a contractor, or that they are merely daily wage or short term or casual employees when in fact they are doing the work of regular employees” The judgement also hints that “globalization/liberalization in the name of growth cannot be at the human cost of exploitation of workers”
The above judgement is expected to be a landmark judgement. Therefore, if the contractor is not paying the gratuity to his employee(s) the principal employer cannot escape from his liability. Please find the attached judgement also.
Regards,
Madhu.T.K
From India, Kannur
Dear Madhu,
Thank you for quoting the judgment. I read the 17-page attachment, and my head is spinning with the large amount of legal inputs ;)
One interesting thing I noted: The judgment states that the Contract Labour Act specifies that the principal employer is liable for everything covered in the Payment of Wages Act. The Payment of Wages Act specifically excludes dues under gratuity (as also mentioned in the judgment). However, they have still decided that the principal employer has to pay. I wonder if there is any other judgment contrary to this one.
From India, Mumbai
Thank you for quoting the judgment. I read the 17-page attachment, and my head is spinning with the large amount of legal inputs ;)
One interesting thing I noted: The judgment states that the Contract Labour Act specifies that the principal employer is liable for everything covered in the Payment of Wages Act. The Payment of Wages Act specifically excludes dues under gratuity (as also mentioned in the judgment). However, they have still decided that the principal employer has to pay. I wonder if there is any other judgment contrary to this one.
From India, Mumbai
I have gone through the above discussion. I have a slightly different query or, I would say, need to discuss another point, i.e.:
Say, there is one contractor who is providing services to different organizations/PE. The contracting business has been ongoing for more than 5 years. However, the contractual arrangements with the PEs are less than 5 years. In a scenario where employees of the contractor have completed 5 years of service with the contractor, and the contractor is unwilling to fulfill obligations such as Gratuity, etc., is the PE responsible for such dues? Especially considering that the PE may have entered into an arrangement with the contractor just a year or two before?
Regards,
Pramod Thakar
From India, Pune
Say, there is one contractor who is providing services to different organizations/PE. The contracting business has been ongoing for more than 5 years. However, the contractual arrangements with the PEs are less than 5 years. In a scenario where employees of the contractor have completed 5 years of service with the contractor, and the contractor is unwilling to fulfill obligations such as Gratuity, etc., is the PE responsible for such dues? Especially considering that the PE may have entered into an arrangement with the contractor just a year or two before?
Regards,
Pramod Thakar
From India, Pune
Banerjee's apprehension about the definition of wages as given in the Payment of Wages Act is correct, and the court also took that into consideration. However, the Contract Labour Act, which came into force later, provides more scope for the principal employer's liability. I do not believe there is another judgment that absolves the principal employer's liability.
In order for the principal employer to be liable to pay gratuity on behalf of the contractor, the employee in question should have worked for the principal employer. If the employee has only worked for two years, the issue of gratuity will not arise concerning employment in the principal employer's plant or organization. Any disputes will be solely between the employee and their actual employer, i.e., the contractor.
Typically, when a contract is awarded for manpower arrangement or outsourcing, there is an understanding that no single individual will work continuously. This understanding is in place to prevent such types of litigation in the future.
Regards,
Madhu.T.K
From India, Kannur
In order for the principal employer to be liable to pay gratuity on behalf of the contractor, the employee in question should have worked for the principal employer. If the employee has only worked for two years, the issue of gratuity will not arise concerning employment in the principal employer's plant or organization. Any disputes will be solely between the employee and their actual employer, i.e., the contractor.
Typically, when a contract is awarded for manpower arrangement or outsourcing, there is an understanding that no single individual will work continuously. This understanding is in place to prevent such types of litigation in the future.
Regards,
Madhu.T.K
From India, Kannur
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