Dear Friends/Sir,
Outsourced employees are working in XYZ Company under the XYZ contractor, who has also deployed their employees in ABC Company. Now, the question arises as the XYZ contractor has transferred some of his employees to ABC Company. These employees have served in XYZ Company for 4 years, and they are now requesting to transfer their service along with gratuity to ABC Company. It is important to note that although the contractor remains the same, the companies are different.
Please advise on what course of action should be taken in this situation.
Subhani.T
From India
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Outsourced employees are working in XYZ Company under the XYZ contractor, who has also deployed their employees in ABC Company. Now, the question arises as the XYZ contractor has transferred some of his employees to ABC Company. These employees have served in XYZ Company for 4 years, and they are now requesting to transfer their service along with gratuity to ABC Company. It is important to note that although the contractor remains the same, the companies are different.
Please advise on what course of action should be taken in this situation.
Subhani.T
From India
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Dear Subhani,
I believe that the entire outsourcing arrangement mentioned in the post falls under the purview of the CLRA Act, 1970. However, I am uncertain on whose behalf the query has been raised - whether it is on behalf of the contract employee, the contractor, or the principal employer. Regardless of the party involved, the answer remains the same in terms of the CLRA Act.
As you may know, the system of contract labor is one of the most disguised forms of indirect employment, often leaving laborers vulnerable. Employers across various industries prefer and promote the contract labor system to deter unionization of regular labor, bypass labor laws, and maintain flexibility in hiring and firing based on market conditions. This preference has led to the enactment of the CLRA Act, 1970. Recognizing the inadequate enforcement of the Act and its rules, the judiciary has progressively expanded the vicarious liabilities of principal employers under the Act. Consequently, engaging contract labor in strict compliance with the CLRA Act, 1970 offers no significant advantage over employing regular workers.
Regarding your question, while the vicarious liability imposed on the principal employer is restricted to matters outlined in sections 20 and 21(4) of the Act, other employment conditions like bonuses, gratuities, compensation for work-related accidents, and contributions to EPF are also considered the employer's responsibilities under the spirit of the law. The actual employment contract exists solely between the contractor and their contract laborers. Since gratuity is a terminal benefit dependent on a minimum length of unblemished service under the same employer, a contract employee cannot claim gratuity from the principal employer for whom they worked through a contractor for a shorter duration. However, the contractor may choose to incorporate the notional value of such indirect employment benefits into their charges, depending on the authenticity of the contract and its specific terms with the principal employer.
Nevertheless, contract laborers cannot claim gratuity from the principal employer, XYZ Company, nor transfer their services with continuity to another principal employer, ABC Company. As their services remain under the same contractor, any claim for gratuity following the termination of their employment, if applicable after meeting the minimum qualifying service, must be directed to the contractor.
I hope this clarifies the complexities surrounding contract labor and vicarious liabilities. Let me know if you require further assistance or clarification on this matter.
Best regards,
[Your Name]
From India, Salem
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6185I believe that the entire outsourcing arrangement mentioned in the post falls under the purview of the CLRA Act, 1970. However, I am uncertain on whose behalf the query has been raised - whether it is on behalf of the contract employee, the contractor, or the principal employer. Regardless of the party involved, the answer remains the same in terms of the CLRA Act.
As you may know, the system of contract labor is one of the most disguised forms of indirect employment, often leaving laborers vulnerable. Employers across various industries prefer and promote the contract labor system to deter unionization of regular labor, bypass labor laws, and maintain flexibility in hiring and firing based on market conditions. This preference has led to the enactment of the CLRA Act, 1970. Recognizing the inadequate enforcement of the Act and its rules, the judiciary has progressively expanded the vicarious liabilities of principal employers under the Act. Consequently, engaging contract labor in strict compliance with the CLRA Act, 1970 offers no significant advantage over employing regular workers.
Regarding your question, while the vicarious liability imposed on the principal employer is restricted to matters outlined in sections 20 and 21(4) of the Act, other employment conditions like bonuses, gratuities, compensation for work-related accidents, and contributions to EPF are also considered the employer's responsibilities under the spirit of the law. The actual employment contract exists solely between the contractor and their contract laborers. Since gratuity is a terminal benefit dependent on a minimum length of unblemished service under the same employer, a contract employee cannot claim gratuity from the principal employer for whom they worked through a contractor for a shorter duration. However, the contractor may choose to incorporate the notional value of such indirect employment benefits into their charges, depending on the authenticity of the contract and its specific terms with the principal employer.
Nevertheless, contract laborers cannot claim gratuity from the principal employer, XYZ Company, nor transfer their services with continuity to another principal employer, ABC Company. As their services remain under the same contractor, any claim for gratuity following the termination of their employment, if applicable after meeting the minimum qualifying service, must be directed to the contractor.
I hope this clarifies the complexities surrounding contract labor and vicarious liabilities. Let me know if you require further assistance or clarification on this matter.
Best regards,
[Your Name]
From India, Salem
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The claim for gratuity doesn't lie with the principal employer, may it be XYZ or ABC. Gratuity is payable only by the direct employer. Although in this case, the direct employer will be the same, whereas the principal employer will be changed.
From India, Pune
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From India, Pune
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The person in question is an employee of the firm that has taken a contract to deploy manpower in various companies. If this person has worked with his employer (the contractor who has contracted to supply manpower) for not less than 5 years, he can receive gratuity from him. It is not necessary to consider for whom or which company this person worked. What needs to be considered for the employee to be entitled to gratuity is whether he has worked for 5 years with an employer. Therefore, if this person has been with the employer (the contractor) for 5 years, with each year constituting continuous service as per the Payment of Gratuity Act, he will be entitled to receive gratuity from his employer, even though he had worked for different companies as directed by his employer (the contractor).
Madhu.T.K
From India, Kannur
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Madhu.T.K
From India, Kannur
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Contract employee & Principal employer 2017.pdf
EMPLOYEE CONTRACT.docx