If Contractor deploys labour for 2 years in one organization and the same labour for 3 years in another organization, Who would be liable for paying gratuity to contract labours in this case ? The contractor or if principal employer is liable to pay the gratuity then principal employer of which organization would be liable to pay or principal employers of both organization will pay the gratuity?
From India, Gurgaon
From India, Gurgaon
As per the Payment of Gratuity Act 1972, the liability to pay gratuity is on the establishment which has employed the workman, the contract labour in this case. There is no direct liability of the Principal Employer in this statute. The contractor establishment is liable to pay the gratuity and a claim can lie on it only. The following High Court Judgements are clear on this point.
(1) Comminco Binani Zinc Ltd. v. Pappachan, 1989 LLR 123 (Ker.H.C.) = 1989 (58) FLR 528.
(2) Madras Fertilisers Ltd. v. Controlling Authority under the Payment of Gratuity Act, 2003 LLR 244 (Mad. H.C.) = 2003 (97) FLR 275.
(3) Superintending Engineer, Mettur Thermal Power Station, Mettur v. Appellate Authority, Joint Commissioner of Labour Combatore & Another, 2012 LLR 1160 (Mad. H.C.)
The Contractor would suitably load the gratuity factor in its cost and indirectly the Principal Employer has to bear it.
From India, Mumbai
1534(1) Comminco Binani Zinc Ltd. v. Pappachan, 1989 LLR 123 (Ker.H.C.) = 1989 (58) FLR 528.
(2) Madras Fertilisers Ltd. v. Controlling Authority under the Payment of Gratuity Act, 2003 LLR 244 (Mad. H.C.) = 2003 (97) FLR 275.
(3) Superintending Engineer, Mettur Thermal Power Station, Mettur v. Appellate Authority, Joint Commissioner of Labour Combatore & Another, 2012 LLR 1160 (Mad. H.C.)
The Contractor would suitably load the gratuity factor in its cost and indirectly the Principal Employer has to bear it.
From India, Mumbai
Respected Sir/Ma'am,
I'm well aware of fact that it is the responsibility of contractor establishment to pay for the gratuity and principal employer will pay in case of default by contractor establishment.
My concern/query is when an contract labour is employed by a contractor for 3 years in a firm and for 2years in another firm whether he would be eligible for gratuity as he has completed 5 years of service and if yes in case of default by contractor establishment which of the principal employer would be liable ?
From India, Gurgaon
I'm well aware of fact that it is the responsibility of contractor establishment to pay for the gratuity and principal employer will pay in case of default by contractor establishment.
My concern/query is when an contract labour is employed by a contractor for 3 years in a firm and for 2years in another firm whether he would be eligible for gratuity as he has completed 5 years of service and if yes in case of default by contractor establishment which of the principal employer would be liable ?
From India, Gurgaon
Neither the Principal Employer I nor II will be legally responsible for payment of gratuity to the contract labour, the claim for gratuity can only lie against the Contractor. The aforesaid judgements are supportive of this position of law.
From India, Mumbai
From India, Mumbai
Legally there is nothing to say that the principal employer is liable.
Unfortunately, the courts have decided otherwise. There are many cases, including some at Supreme Court Level.
This particular case decided by Madras High Court very clearly states that Principal Employer is liable for gratuity to be paid to the contract workers in addition to the liability of the contractor. the judgement is detailed and will take a time to read. but the judgement clearly states that Gratuity is covered in sec 21(4) of Contract Labour Act.
https://indiankanoon.org/doc/1632593/
I would of course, be happy if the seniors on the group give their opinion, because this matter has come many times in our audits and there is a regard dispute on this.
There was also a decision by SC in the case of SPIC or one of its fertiliser subsidiaries for contract labour used in Chennai Port, which I can not find at the moment
From India, Mumbai
Unfortunately, the courts have decided otherwise. There are many cases, including some at Supreme Court Level.
This particular case decided by Madras High Court very clearly states that Principal Employer is liable for gratuity to be paid to the contract workers in addition to the liability of the contractor. the judgement is detailed and will take a time to read. but the judgement clearly states that Gratuity is covered in sec 21(4) of Contract Labour Act.
https://indiankanoon.org/doc/1632593/
I would of course, be happy if the seniors on the group give their opinion, because this matter has come many times in our audits and there is a regard dispute on this.
There was also a decision by SC in the case of SPIC or one of its fertiliser subsidiaries for contract labour used in Chennai Port, which I can not find at the moment
From India, Mumbai
Even if we admit that the same worker has been engaged for three years, how can the principal employer be held liable for gratuity of contractor's worker when the worker has worked only for three years? The principal employer cannot take on his shoulder the service of the workman for two years under some other principal employer. It is true that if the same worker has been working for the same principal employer but under different contractors, the responsibility of payment of gratuity MAY fall on the principal employer, provided it is established that the principal employer has sufficient knowledge that the same worker has been engaged and the principal employer has been supervising the work of the worker in all respect or simply if the contract is sham contract. But in this case it is contractor who has employed the worker for five years and certainly, the contractor should pay gratuity provided the Payment of Gratuity Act is applicable to his establishment.
From India, Kannur
From India, Kannur
The contractor is liable to pay gratuity, provided he has been charging the gratuity amount from principal employer against worker under contract.While ensuring the fact that the worker working for the contract fulfills the term and conditions for gratuity,irrespective of number of principal employers for for whom he worked under the same contractor.
Length of service with contractor must be accounted for gratuity.
While appointing the contractor,and agreement therein made by the parties,principal employer usually puts the liability of statutes compliances on contractor and pays accordingly.
Therefore it becomes the contractors responsibility to abide by and arrange management of such payments like gratuity to pay to the eligible candidates.
Important is proper establishment of contract and due fulfillement of the same
From India, Vadodara
Length of service with contractor must be accounted for gratuity.
While appointing the contractor,and agreement therein made by the parties,principal employer usually puts the liability of statutes compliances on contractor and pays accordingly.
Therefore it becomes the contractors responsibility to abide by and arrange management of such payments like gratuity to pay to the eligible candidates.
Important is proper establishment of contract and due fulfillement of the same
From India, Vadodara
Dear Angad,
The paymaster is liable to pay the gratuity, hence the contractor is the paymaster.
Your posting gives impression that the employees are working under a Contractor but he deploys them in different organizations for different period by thus the employees have already completed five years service. If the case is so, the contractor is liable to pay the gratuity.
Further, the principal employer discharge the liability where contractor fails to do so. But in the said case the principal employer are more than one, and the eligible workmen have not engaged in their establishment for full term of five years.
Therefore the contractor under whom workmen were working has to pay the gratuity.
From India, Mumbai
The paymaster is liable to pay the gratuity, hence the contractor is the paymaster.
Your posting gives impression that the employees are working under a Contractor but he deploys them in different organizations for different period by thus the employees have already completed five years service. If the case is so, the contractor is liable to pay the gratuity.
Further, the principal employer discharge the liability where contractor fails to do so. But in the said case the principal employer are more than one, and the eligible workmen have not engaged in their establishment for full term of five years.
Therefore the contractor under whom workmen were working has to pay the gratuity.
From India, Mumbai
Dear All,
Every contract worker is eligible for Gratuity if he had worked for minimum 5 years continuously (without any break in employment, weekly off/paid holidays/absent with permission exempted) under one Contractor only.
Different spell of employment with multiple contractor(s) can not be computed for arriving at stipulated 5 years.
Also, if the worker's service was discontinued due to completion of the present/running contract and was re-engaged on another contract would also cannot be clubbed to count for 5 years.
Please correct me if I am wrong.
From India, Thane
Every contract worker is eligible for Gratuity if he had worked for minimum 5 years continuously (without any break in employment, weekly off/paid holidays/absent with permission exempted) under one Contractor only.
Different spell of employment with multiple contractor(s) can not be computed for arriving at stipulated 5 years.
Also, if the worker's service was discontinued due to completion of the present/running contract and was re-engaged on another contract would also cannot be clubbed to count for 5 years.
Please correct me if I am wrong.
From India, Thane
What is the objective of the Gratuity Act?
The object of the act is to help the workman financially by giving gratuity after retirement for the recognition of continuous, meritorious services and sincere efforts by the employee towards the organization or at the point of resignation after 5 years of continuous service.
Gratuity is a benefit which is payable under the Payment of Gratuity Act 1972. Gratuity is a sum of money paid by an employer to an employee for services rendered in the company. But, gratuity is paid only to employees who complete five or more years with the company.
Here the basic condition is 5 years under an employer is mandatory condition except in the case of death or disablement. In the given instant brief as guided by our Colleagues, there is no binding either on any of the contractors or on the Principal Employer to pay gratuity. But on such situations, the Principal employer may face practically legal litigations.
In some instances, the Contractors keep changing but the Work place/ Principal Employer and Contract Worker continues to work for over 30 years or so where there are questions raised by authorities and employer even though legally not liable directly, he is answerable. This is a practical scenario. Look at instances of huge number of such continued workers may be 100/ 200 or more then batch of petitions may arise. Here when contractor changes better to take fresh set of Workers which is an ideal process but practically a challenging one. But if we do, lot of litigations can be minimized.
Kindly have a thought on this.
All the Best, God Bless,
Dr.P.SIVAKUMAR
Doctor Siva Global HR
Tamil Nadu
From India, Chennai
The object of the act is to help the workman financially by giving gratuity after retirement for the recognition of continuous, meritorious services and sincere efforts by the employee towards the organization or at the point of resignation after 5 years of continuous service.
Gratuity is a benefit which is payable under the Payment of Gratuity Act 1972. Gratuity is a sum of money paid by an employer to an employee for services rendered in the company. But, gratuity is paid only to employees who complete five or more years with the company.
Here the basic condition is 5 years under an employer is mandatory condition except in the case of death or disablement. In the given instant brief as guided by our Colleagues, there is no binding either on any of the contractors or on the Principal Employer to pay gratuity. But on such situations, the Principal employer may face practically legal litigations.
In some instances, the Contractors keep changing but the Work place/ Principal Employer and Contract Worker continues to work for over 30 years or so where there are questions raised by authorities and employer even though legally not liable directly, he is answerable. This is a practical scenario. Look at instances of huge number of such continued workers may be 100/ 200 or more then batch of petitions may arise. Here when contractor changes better to take fresh set of Workers which is an ideal process but practically a challenging one. But if we do, lot of litigations can be minimized.
Kindly have a thought on this.
All the Best, God Bless,
Dr.P.SIVAKUMAR
Doctor Siva Global HR
Tamil Nadu
From India, Chennai
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