Just asking: The contractor only charges 5% as the service charge, and the Gratuity is 4.81%. How will the contractor be able to pay the Gratuity if the Principal employer does not pay for the Gratuity separately?
The Contractor is willing to pay Gratuity to the employees, but the bill needs to be raised for that specified amount and sent to the principal employer. However, the Principal employer does not wish to pay the bills regarding Gratuity payment. They state that the contractor should take care of that.
What should be the right course of action for the contractor since it will be financially impossible for the contractor to pay for the Gratuity of the employees with such a low margin of service charge? There are some principal employers who only pay 3% as a service charge.
From India, Kolkata
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The Contractor is willing to pay Gratuity to the employees, but the bill needs to be raised for that specified amount and sent to the principal employer. However, the Principal employer does not wish to pay the bills regarding Gratuity payment. They state that the contractor should take care of that.
What should be the right course of action for the contractor since it will be financially impossible for the contractor to pay for the Gratuity of the employees with such a low margin of service charge? There are some principal employers who only pay 3% as a service charge.
From India, Kolkata
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Amazing explanation "Story".
When GST is only 18% of the labor contract, and the contractor is working on a 5% service charge, labor license fees, and other benefits for employees like EPF, ESIC, conveyance, etc. are also additional payments. Above all, they have to pay income tax on the contractor business.
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725When GST is only 18% of the labor contract, and the contractor is working on a 5% service charge, labor license fees, and other benefits for employees like EPF, ESIC, conveyance, etc. are also additional payments. Above all, they have to pay income tax on the contractor business.
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Hi Jeet,
This is between the contractor and principal employer; employees cannot suffer for the same. It is the prime responsibility of the contractor to pay the gratuity. If the contractor fails to do so, then the responsibility shifts towards the principal employer. Later on, the principal employer can charge the same from the contractor for paying gratuity on their behalf.
The ideal scenario in this type of situation is for the contractor to pay the gratuity to the eligible employee and charge the same from the principal employer. This is because the contractual employee worked for the principal employer and helped in the working of the process/company.
From India, New Delhi
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This is between the contractor and principal employer; employees cannot suffer for the same. It is the prime responsibility of the contractor to pay the gratuity. If the contractor fails to do so, then the responsibility shifts towards the principal employer. Later on, the principal employer can charge the same from the contractor for paying gratuity on their behalf.
The ideal scenario in this type of situation is for the contractor to pay the gratuity to the eligible employee and charge the same from the principal employer. This is because the contractual employee worked for the principal employer and helped in the working of the process/company.
From India, New Delhi
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To be specific:
I wish to convey that we, as contractors, wish to pay the employees their dues and that we are willing to do so. But on what grounds can we compel the principal employer to pay for the Gratuity? As per some old contracts that we are holding with the Principal Employer, the charges for PF, ESI, etc., are all included and mentioned in the contract, but Gratuity was not mentioned. When we asked them to pay for the Gratuity, they are saying that it is not specified in the contract.
Please suggest on what grounds can we compel the Principal Employer to pay for the Gratuity, or is it that we cannot ask them for the Gratuity payment since it was not mentioned in the contract.
I need suggestions...
Regards,
Jeet Sarkar
+91 8013830600
hrjeetsarkar@gmail.com
From India, Kolkata
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I wish to convey that we, as contractors, wish to pay the employees their dues and that we are willing to do so. But on what grounds can we compel the principal employer to pay for the Gratuity? As per some old contracts that we are holding with the Principal Employer, the charges for PF, ESI, etc., are all included and mentioned in the contract, but Gratuity was not mentioned. When we asked them to pay for the Gratuity, they are saying that it is not specified in the contract.
Please suggest on what grounds can we compel the Principal Employer to pay for the Gratuity, or is it that we cannot ask them for the Gratuity payment since it was not mentioned in the contract.
I need suggestions...
Regards,
Jeet Sarkar
+91 8013830600
hrjeetsarkar@gmail.com
From India, Kolkata
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@ Jeet, you can have an addendum in the contract to include a gratuity clause. Ask the principal employer if the employee worked for them and assisted in the company's processes. To show gratitude to the employee, they should pay the gratuity.
From India, New Delhi
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From India, New Delhi
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The agreement between the PE and contractor should be on an actual cost basis + service charge. The invoice may be Monthly gross + Employer's portion of PF & ESI + Leave pay (as and when applicable) + Statutory Bonus (as and when applicable) + Gratuity (as and when applicable) + Service charge (5% or 3% or any other %) + GST as applicable.
In my opinion, with the above method and at least a 5% service charge, the service may be viable. Otherwise, after deducting 1% TDS for proprietorship organizations & 2% TDS for others along with other costs (employee salary, labor license, electricity, internet, rent, stationary, etc.), it will be very difficult to provide service properly.
Unfortunately, there are many service providers due to a lack of business opportunities, especially in the eastern region, who accept business at very low service charge percentages. Some of these service providers deposit less contributions to PF, ESIC, etc., by falsifying the payroll month after month.
To conduct business ethically, it is also the responsibility of the PE to properly care for the service providers; failing to do so will result in society suffering in general.
I have had a bitter personal experience with one of the big US organizations 6 years ago when the HR department of the concerned organization suggested that I remove employees every 3 years to avoid Gratuity - this is the reality even with big organizations.
S K Bandyopadhyay (Howrah, WB)
From India, New Delhi
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In my opinion, with the above method and at least a 5% service charge, the service may be viable. Otherwise, after deducting 1% TDS for proprietorship organizations & 2% TDS for others along with other costs (employee salary, labor license, electricity, internet, rent, stationary, etc.), it will be very difficult to provide service properly.
Unfortunately, there are many service providers due to a lack of business opportunities, especially in the eastern region, who accept business at very low service charge percentages. Some of these service providers deposit less contributions to PF, ESIC, etc., by falsifying the payroll month after month.
To conduct business ethically, it is also the responsibility of the PE to properly care for the service providers; failing to do so will result in society suffering in general.
I have had a bitter personal experience with one of the big US organizations 6 years ago when the HR department of the concerned organization suggested that I remove employees every 3 years to avoid Gratuity - this is the reality even with big organizations.
S K Bandyopadhyay (Howrah, WB)
From India, New Delhi
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Primary responsibility Contractor If Contractor fails to pay entitled gratuity,the PE can step in and clear the amount and recover from Contractor.
From India, Pune
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From India, Pune
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The contractor is responsible to pay gratuity to workmen engaged under him but not by the principal employer.
The work awarded to the contractor by the principal employer is inclusive of all the labor liability. The contractor cannot deny to pay gratuity to its employees on the ground that the awarded job did not have a gratuity component.
The aggrieved employees need to file a case for their gratuity claim before the authority/court. The authority/court can only pass direction to the principal employer to pay gratuity since the contractor failed to comply.
From India, Mumbai
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The work awarded to the contractor by the principal employer is inclusive of all the labor liability. The contractor cannot deny to pay gratuity to its employees on the ground that the awarded job did not have a gratuity component.
The aggrieved employees need to file a case for their gratuity claim before the authority/court. The authority/court can only pass direction to the principal employer to pay gratuity since the contractor failed to comply.
From India, Mumbai
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The matter of the discussion is not whether the employee will be paid gratuity or not. The employee is paid gratuity by the contractor. However, the actual fact of the matter is that some old contracts between the Principal Employer and the Contractor do not mention the Gratuity clause in the contract. As a result, the Principal Employer is denying to pay the Gratuity part to the contractor to be paid to the employees.
Q1. What to do in this situation? Q2. How can the contractor convince the Principal Employer that just like PF, ESI, etc., they also need to pay for all the statutory compliance for the employee even if it was not mentioned in the contract?
Kindly suggest.
From India, Kolkata
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Q1. What to do in this situation? Q2. How can the contractor convince the Principal Employer that just like PF, ESI, etc., they also need to pay for all the statutory compliance for the employee even if it was not mentioned in the contract?
Kindly suggest.
From India, Kolkata
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