Dear Sirs,
Good Morning to All.
Seek Clarifications on the following:
Sub: Gratuity Eligibility for a person who worked as a Consultant/Adviser in the same Company after retirement for 10 Years.
Mr.Kumar worked as a Manager for 25 Years and retired from the Company at the age of 60.
He has also got retirement benefits from the Company at the time of retirement.
After 6 months he has joined in the same Company as a Consultant/Adviser on contract basis and every Year the Contract has been renewed. TDS deducted by the Company at the time of Consultancy payment.
He as worked as a consultant/adviser for 10 years and every year the contract has been extended/renewed with fresh order. (No Break in Service)
No PF deducted.
Now Mr.Kumar is requesting gratuity.
Please let us know he is eligible for Gratuity.
Regards,
Ganapathy V
From India
1Good Morning to All.
Seek Clarifications on the following:
Sub: Gratuity Eligibility for a person who worked as a Consultant/Adviser in the same Company after retirement for 10 Years.
Mr.Kumar worked as a Manager for 25 Years and retired from the Company at the age of 60.
He has also got retirement benefits from the Company at the time of retirement.
After 6 months he has joined in the same Company as a Consultant/Adviser on contract basis and every Year the Contract has been renewed. TDS deducted by the Company at the time of Consultancy payment.
He as worked as a consultant/adviser for 10 years and every year the contract has been extended/renewed with fresh order. (No Break in Service)
No PF deducted.
Now Mr.Kumar is requesting gratuity.
Please let us know he is eligible for Gratuity.
Regards,
Ganapathy V
From India
It is discernible from the inputs that Mr.Kumar's post-retirement engagement in the same organization is purely a contract for service and as such he cannot be treated as an employee after his retirement on superannuation. Therefore, he is not eligible for gratuity for the period of service rendered as a consultant/adviser.
From India, Salem
From India, Salem
I would like to share with Mr. Umakanthan one of my recent interaction with appropriate authority under PG Act ( DLC). We have one client who are in business of Medical diagnostic. Retirement of the employees are after attaining the age of 58 years. The organization has a system of re-appointment of some efficient employees after retirement as consultant with lesser salary than at the time of retirement. There were no disputes for last 30 years. One month before one employee who has been re-appointed as consultant left the organization after 7 years and claimed for gratuity. The organization refused to pay gratuity.
The employee appealed to Appropriate authority under PG Act. During cancellation, DLC raised the following questions :-
1. The employee is doing the similar job which he was doing during his employment.
2. Designation consultant/adviser has been made by Management.
3. His monthly gross at the time of retirement was 35,000/- and now it is 22,000/.
4. He was member of EPFO and settle the accounts and receiving pension from EPFO. Therefore, he is an excluded employee.
5. As the monthly gross is 22,000/- consolidated , he is not covered under ESIC and Bonus Act.
6, But the employee is covered under PG Act as he is doing similar jobs when he was an employee. Therefore, whatsoever designation given by Management has no value. He should be treated as employee and to be paid gratuity considering 22,000/ as basic for 7 years. During discussion DLC also commented that if you designate all your permanent employee as Consultant / Adviser, will they not be entitled for PF, ESIC, BONUS & GRATUITY ? DLC also commented that it is by passing law.
7. Management agree to do so and paid gratuity to the employee.
8. As there is still 15/16 similar employees in similar status and in future the organization will again engage retired employees - We recommended that re-appointment should not be more than 4 years in future.
If you have any other view , please share.
Thanks & Regards,
S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions
+91 98310 81531
USD HR Solutions – To Strive towards excellence with effort and integrity
From India, New Delhi
The employee appealed to Appropriate authority under PG Act. During cancellation, DLC raised the following questions :-
1. The employee is doing the similar job which he was doing during his employment.
2. Designation consultant/adviser has been made by Management.
3. His monthly gross at the time of retirement was 35,000/- and now it is 22,000/.
4. He was member of EPFO and settle the accounts and receiving pension from EPFO. Therefore, he is an excluded employee.
5. As the monthly gross is 22,000/- consolidated , he is not covered under ESIC and Bonus Act.
6, But the employee is covered under PG Act as he is doing similar jobs when he was an employee. Therefore, whatsoever designation given by Management has no value. He should be treated as employee and to be paid gratuity considering 22,000/ as basic for 7 years. During discussion DLC also commented that if you designate all your permanent employee as Consultant / Adviser, will they not be entitled for PF, ESIC, BONUS & GRATUITY ? DLC also commented that it is by passing law.
7. Management agree to do so and paid gratuity to the employee.
8. As there is still 15/16 similar employees in similar status and in future the organization will again engage retired employees - We recommended that re-appointment should not be more than 4 years in future.
If you have any other view , please share.
Thanks & Regards,
S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions
+91 98310 81531
USD HR Solutions – To Strive towards excellence with effort and integrity
From India, New Delhi
Perceptions differ according to the circumstances giving raise to the cause of action involving any question of law as well as facts and so are the interpretations, Mr.Bandyobadhyay.
The definition of the term ' employee ' under any Labor Law revolves around the concept of contract of service only. Only under a contract of service the relationship of employer - employee emerges imposing certain mutual statutory obligations as well as creating certain rights on both. In the absence of such a relationship, interpretation has to be done according to the terms of the contract only which make the contract for service not in violation of Sec.23 or 27 of the Indian Contract Act,1872.
A contract of service and a contract for service can be distinguished by the terms of the contract such as the control and supervision over the work of the contractor by the contractee, the extent and availability of the services of the contractor at the disposal of the contractee, the freedom of both the parties to terminate the contract apart from the mode of payment of monetary consideration which is called as salary/wages in the former and service charges/ retainer fee in the latter.
The situation narrated in your post is indicative of the unfair labor practice adopted by the employer circumventing the provisions of law by employing some fancy nomenclature such as 'consultant', 'adviser' etc., with the meek consent of the employees after their retirement on reaching the age of superannuation. Designation, as we all know, is not a decisive factor to determine the factum of the nature of one's employment. Therefore, I would concur with the interpretation of the Deputy Commissioner based on the facts of the particular case.
After all, law is just like God in that it helps only those who try to help themselves at the appropriate time!
From India, Salem
The definition of the term ' employee ' under any Labor Law revolves around the concept of contract of service only. Only under a contract of service the relationship of employer - employee emerges imposing certain mutual statutory obligations as well as creating certain rights on both. In the absence of such a relationship, interpretation has to be done according to the terms of the contract only which make the contract for service not in violation of Sec.23 or 27 of the Indian Contract Act,1872.
A contract of service and a contract for service can be distinguished by the terms of the contract such as the control and supervision over the work of the contractor by the contractee, the extent and availability of the services of the contractor at the disposal of the contractee, the freedom of both the parties to terminate the contract apart from the mode of payment of monetary consideration which is called as salary/wages in the former and service charges/ retainer fee in the latter.
The situation narrated in your post is indicative of the unfair labor practice adopted by the employer circumventing the provisions of law by employing some fancy nomenclature such as 'consultant', 'adviser' etc., with the meek consent of the employees after their retirement on reaching the age of superannuation. Designation, as we all know, is not a decisive factor to determine the factum of the nature of one's employment. Therefore, I would concur with the interpretation of the Deputy Commissioner based on the facts of the particular case.
After all, law is just like God in that it helps only those who try to help themselves at the appropriate time!
From India, Salem
Thanks Mr. Umakanthan for your value added opinion. At DLC office I asked DLC about the method of determination Adviser/ Consultant vs Employee. DLC opined that Adviser / Consultant are usually outsiders with specialized knowledge on any subject - Direct & Indirect Taxation, Labour Laws, Special Technical Skill, Implementation of special software package etc.
They are not visiting organization every day, do not engage with daily routine work and in very few cases they are insiders. Those are contract for service.
Whereas any retired employee if engaged after retirement to do the same job/ similar type of job which he was doing prior to retirement and visiting office in most of the cases on regular basis is not Advisor / consultant.
DLC also opined that many organizations are seeking opinion from outside expert for specific issues , those persons are Adviser / consultant.
The employees in case of re-appointment should be treated like regular employees and labor laws as applicable to them should be implemented.
It sounds to me logical.
S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions
+91 98310 81531
skb@usdhrs,in
USD HR Solutions – To Strive towards excellence with effort and integrity
From India, New Delhi
They are not visiting organization every day, do not engage with daily routine work and in very few cases they are insiders. Those are contract for service.
Whereas any retired employee if engaged after retirement to do the same job/ similar type of job which he was doing prior to retirement and visiting office in most of the cases on regular basis is not Advisor / consultant.
DLC also opined that many organizations are seeking opinion from outside expert for specific issues , those persons are Adviser / consultant.
The employees in case of re-appointment should be treated like regular employees and labor laws as applicable to them should be implemented.
It sounds to me logical.
S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions
+91 98310 81531
skb@usdhrs,in
USD HR Solutions – To Strive towards excellence with effort and integrity
From India, New Delhi
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Gratuity Eligibility.pdf
Gratuity eligibility for less than 5 yrs. (4yrs.240days). docx