Dear All ,
I have one issue.In our company ,almost all the work order of contractor we have given the gartituty cost component(4.81%) in cost break up sheet along with other statutay component .My query is that is it compulsory for contractor establishment to take garuity scheme of LIC ? or what is the relevance of LIC gratiuty scheme.
As we have given the gratuty component,how we will ensure that contrator will pay the gratuity to his employee after 5 years because it is clear after work completion ,contractor may engage his employee to different company from time to time.
So pls advise what is the appropriate step we will take as PE.
Mantu71
From India, Calcutta
Contributing Member
21I have one issue.In our company ,almost all the work order of contractor we have given the gartituty cost component(4.81%) in cost break up sheet along with other statutay component .My query is that is it compulsory for contractor establishment to take garuity scheme of LIC ? or what is the relevance of LIC gratiuty scheme.
As we have given the gratuty component,how we will ensure that contrator will pay the gratuity to his employee after 5 years because it is clear after work completion ,contractor may engage his employee to different company from time to time.
So pls advise what is the appropriate step we will take as PE.
Mantu71
From India, Calcutta
Contributing Member
The principal employer is concerned only those employees engaged through a contractor who have been with the principal employer for five years. Though there are conflicting judgements about Principal employer's liability towards gratuity payable to contract labour, we can rely one common principle, that is, an employer's responsibility in case a worker works for at least five years, whether on his rolls including as a casual worker or through a contractor. At the same time, if the principal employer has no control over the persons being engaged by the contractor (all genuine contract will be like this only) the PE will not have any responsibility for payment of gratuity. But at the same time, if the principal employer dictates who should be engaged at his plant and the contractor only obeys it, that is to say that the contract itself is for a namesake and is sham contract, then the PE will be knowing who all have worked for him and how long had they worked for him and in such a circumstance, it becomes his responsibility to ensure that the contractor has paid the gratuity once he discontinues the service after five years of engagement.
To be of safer side, it is always good if the PE does not interfere in the matter of selection of people for his plant. If he does so, as far as possible, do not engage the same persons for more than one or two years at a time. This does not mean that your should give artificial breaks. Artificial breaks for a few days will not be counted anyway since the principle of 240 days in 12 months is a sharp weapon against any employer.
Taking an LIC policy is purely an arrangement for funding payment of gratuity and it is to be taken care of by the contractor. Moreover, if the PE involves in such matters, the contract may become sham also.
Regards,
Madhu.T.K
From India, Kannur
Most Appreciated Member
To be of safer side, it is always good if the PE does not interfere in the matter of selection of people for his plant. If he does so, as far as possible, do not engage the same persons for more than one or two years at a time. This does not mean that your should give artificial breaks. Artificial breaks for a few days will not be counted anyway since the principle of 240 days in 12 months is a sharp weapon against any employer.
Taking an LIC policy is purely an arrangement for funding payment of gratuity and it is to be taken care of by the contractor. Moreover, if the PE involves in such matters, the contract may become sham also.
Regards,
Madhu.T.K
From India, Kannur
Most Appreciated Member
Hi,
you can do it easily in cost effectiveness way & also keeping in view the statutory compliances. Add 2 things in your work order.
1. Add that you will pay only LIC premium to the contractor.
2. Add that you will pay the gratuity amount when someone will complete 5 years of continuous service with your organization and delete the clause of gratuity cost component of 4.81% in cost break up sheet.
Hope, You would get benefit from this.
From India, Calcutta
Contributing Member
you can do it easily in cost effectiveness way & also keeping in view the statutory compliances. Add 2 things in your work order.
1. Add that you will pay only LIC premium to the contractor.
2. Add that you will pay the gratuity amount when someone will complete 5 years of continuous service with your organization and delete the clause of gratuity cost component of 4.81% in cost break up sheet.
Hope, You would get benefit from this.
From India, Calcutta
Contributing Member
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FORM-F-NOMINATI ON OF GRATUITY.pdf
Gratuity Form I.doc