rhari Started The Discussion:
I have the following views on the Payment of Gratuity Act 1972.
a) whether gratuity act is applicable to contract labour
b) whether it is applicable to fixed tenure contractual appointments

In my view a plain reading of the Act shows that in both above cases it is not applicable.This is because Contract labour is not in the employment of the Contractor.They are only Contract labour as defined under the Contract labour Act which gives them special status under the Contract labour Act and hence are eligible only for the benefits specified under the Contract Labour Act which are PF & ESI/Workmen's compensation only.They are not eligible for gratuity,or bonus.

As regards tenure contractual appointments they are also not eligible for gratuity for the reason that the events on the occurrence of which gratuity is payable under the Act are
1.Resignation
2)Retirement
3)Death
4)Superannuation
5)Termination

Now expiry of tenure of employment is not a defined occurence for payment of gratuity and therefore it would not be payable.

Any views on the above interpretations ?? Any case law to support or reject these ??

Hari
Posted 1st January 2007 From India, Ahmadabad
Hi Hari,

Your interpretation is correct and as along as the person is not an employee of the company, he is not eligible for Gratuity benefits, will send you the relevant doc shortly

Regards
Rajendra Sappa
Posted 1st January 2007
Hi Hari,

You have raised a very interesting point. Although, technically, the non renewal of contract may not amount to resignation, termination, or retirement, an employee employed by a contractor is covered under the Payment of Gratuity Act, and hence cannot be denied the gratuity on his completion of 5 years of continuous service. His non renewal of contract may perhaps be treated as his retirment from service.

As regards the Fixed term employment, the Act clearly makes a provision that in case the employee ceases to be in employment before completing n 5 years of service, he will be entitled to pro rata payment for the period he was in service.

In my previous employment, we had occasion to dispute the payment of gratuity to contract labour even after completion of 5 years of service, and the matter was referred to the Asstt Labour Commissioner. We were directed to make the payment as per the provisions of gratuity Act. I am sure there must be High Court/Supreme court ruling on this subject. I will check this up and give you a further feed back.

Cyril
Posted 1st January 2007 From India, Nagpur
akm18 
complete views on payment of gratuity act .........

Gratuity is a lump sum payment to employee when he retires or leaves service. It is basically a retirement benefit to an employee so that he can live life comfortably after retirement. However, under Gratuity Act, gratuity is payable even to an employee who resigns after completing at least 5 years of service.

In DTC Retired Employees v. Delhi Transport Corporation 2001(4) SCALE 30 = 2001 AIR SCW 2005, it was observed that gratuity is essentially a retiring benefit which as per Statute has been made applicable on voluntary resignation as well. Gratuity is reward for good, efficient and faithful service rendered for a considerable period.

Act provides for minimum gratuity only – The Gratuity Act provides only for minimum gratuity payable. If employee has right to receive higher gratuity under a contract or under an award, the employee is entitled to get higher gratuity. [section 4(5)].

Employers liable under the scheme - The Act applies to every factory, mine, plantation, port, and railway company. It also applies to every shop and establishment where 10 or more persons are employed or were employed on any day in preceding 12 months. [section1(3)]. Since the Act is also applicable to all shops and establishments, it will apply to motor transport undertakings, clubs, chambers of commerce and associations, local bodies, solicitor’s offices etc. , if they are employing 10 or more persons.

Employees eligible for gratuity – ’Employee’ means any person (other than apprentice) employed on wages in any establishment, factory, mine, oilfield, plantation, port, railway company or shop, to do any skilled, semi-skilled or unskilled, manual, supervisory, technical or clerical work, whether terms of such employment are express or implied, and whether such person is employed in a managerial or administrative capacity. However, it does not include any Central/State Government employee. [section 2(e)]. Thus, the Act is applicable to all employees - workers as well as persons employed in administrative and managerial capacity.

Gratuity is payable to a person on (a) resignation (b) termination on account of death or disablement due to accident or disease (c) retirement (d) death. Normally, gratuity is payable only after an employee completes five years of continuous service. In case of death and disablement, the condition of minimum 5 years’ service is not applicable. [section 4(1)].

The Act is applicable to all employees, irrespective of the salary.

Amount of gratuity payable - Gratuity is payable @ 15 days wages for every year of completed service. In the last year of service, if the employee has completed more than 6 months, it will be treated as full year for purpose of gratuity. - - In case of seasonal establishment, gratuity is payable @ 7 days wages for each season. [section 4(2)].

Wages shall consist of basic plus D.A, as per last drawn salary. However, allowances like bonus, commission, HRA, overtime etc. are not to be considered for calculations. [section 2(s)].

In case of employees paid on monthly wages basis, per day wages should be calculated by dividing monthly salary by 26 days to arrive at daily wages e.g. if last drawn salary of a person (basic plus DA) is Rs. 2,600 per month, his salary per day will be Rs. 100 (2,600 divided by 100). Thus, the employee is entitled to get Rs. 1,500 [15 days multiplied by Rs. 100 daily salary] for every year of completed service. If he has completed 30 years of service, he is entitled to get gratuity of Rs. 45,000 (Rs. 1,500 multiplied by 30). Maximum gratuity payable under the Act is Rs. 3.50 lakhs (the ceiling was Rs. 1,00,000 which was increased to 2.50 lakhs on 24.9.97 by an ordinance which was later increased to Rs 3.50 lakhs while converting the ordinance into Act].

Maximum gratuity payable – Maximum gratuity payable is Rs 3.50 lakhs. [Section 4(3)]. [Of course, employer can pay more. Employee has also right to get more if obtainable under an award or contract with employer, as made clear in section 4(5)].

Income-Tax exemption - Gratuity received upto Rs. 3.50 lakhs is exempt from Income Tax. Gratuity paid above that limit is taxable. [section 10(10) of Income Tax Act]. - - However, employee can claim relief u/s 89 in respect of the excess amount.

No Compulsory insurance of gratuity liability – Section 4A provides that every employer must obtain insurance of his gratuity liability with LIC or any other insurer. However, Government companies need not obtain such insurance. If an employee is already member of gratuity fund established by an employer, he has option to continue that arrangement. If an employer employing more than 500 persons establishes an approved gratuity fund, he need not obtain insurance for gratuity liability. - - However, this section has not yet been brought into force. Hence, presently, such compulsory insurance is not necessary.

Gratuity cannot be attached - Gratuity payable cannot be attached in execution of any decree or order of any civil, revenue or criminal court, as per section 13 of the Act.
i hope same is in order.

any comments ......

regards
Posted 1st January 2007 From India, Bahadurgarh
I agree with points of Mr. Hari. Gratuity shud not be payable to a contractual employee. We have appointed one labour contractor for providing housekeeping services for one yr and not paying gratuity. We are paying ESI, PF, Bonus and leave as statutory payments. Earlier we were not ready to pay bonus and leave but after discussion in management, it was decided to pay both as the responsibility to ensure these payments is of prncipal employer only.

Can anyone support the above with some cases / law.

Law is written but it is the interpretation which differs and creates confusion.

regards,

priyanka
Posted 13th June 2008 From India, Mumbai
acchr 
Dear Mr.Hari,

My views are;
*Considering the Contractor as seperate entity, workers working with the contractors would be eligible for Gratiity from contarctor subject to cmpliance of other mendatory conditions like completion of continuous five yeras service ect.
*Since this is also social security legislation and therefore if contractor fails to pay the amount of gratuity the worker would raised the demand before principal employer
*It is then contractors responsibility to get the amount of gratuity from respective employers (as a part of commercial terms he has ensure) for the period/tenure such worker deployed

Kinldy repond if the views are clear and logical.

Regards,

ACCHR
Posted 16th June 2008 From India, Mumbai
hi hari
applicable and eligiable is lot of differnence in that, this grauity act will applicable to all employees wnen he is completed one year service but eligable for grauity five year service,

santhosh Nk
ABB
Posted 19th June 2008 From India
Dear All, i am still not clear whether Gractuity is payable to fix term employer below five years if not what about in case of death. Trushit
Posted 31st January 2009 From India, Ahmadabad
hi, very sumple dear,
if any employee( i.e. directly,probe.ad -hoc,dailywages, badli,casual, contractual and fix) completed 1 yr than applicable Gratuity Act and complited 5 yr service than compalsary eligible Gratuity Act. My dear in short u read defination of employee under tha said Act. this your proper solution.is it clear? ifany query under the labour laws u mail me

with regards,

Paresh M.Vyas
Advocate & Labour laws Consultant(M)
Posted 31st January 2009 From India, Mumbai
Dear Pareshbhai,Thanks a lots for quick reply but Dear Sir,what about following issues.Does Gratuity attract for contractual employment for fixed tenure of employment?what about in case of death?if death occurs then gratuity would payable up to 58 years/retirement or till the duration of fixed tenure?if we have supporting judgement regarding above i will be very thankful to the groupThanks
Posted 6th February 2009 From India, Ahmadabad
This is Bharti.. I've just join this forum.. i've few requests to make.. I worked as a teacher in kindergarten section of full fledge SSC school for 20 yrs.. 1988-2008. i resigned from my job with couple of other collegues. one completed about 7 yrs as a clerck in school and the other about 8 yrs as a KG teacher. friends of mine have posted them a request along with the copy of Gratuity act but theres no response from the management of the school. verbally we get the massage that act does not show the word school is liable to pay gratuity. it seem if u resign from the job u resign from incentives.. we dont find any way out of this but to forgo our rights.. can any one pl. help
Posted 7th February 2009 From India, Mumbai
Dear Paresh Bhai..
Could you pl. reply to my queiry.. Given to understand the Gratuity Act 1972.. person working in railways, shops , factories, mines etc etc are eligible for gratuity after completing min 5yrs of service. I worked in a school in kindergarten section over 20 years,I resigned from the post of teacher and my principal argues there is now word of school mentioned in an act so I'm not eligible for the same. Though my collegues who resigned got their gratuities, but to me she says it was a mistake made earlier so the management is not going to repeat the mistake again by releasing my gratuity. Also She argues on the point saying if u have resigned , you have resigned from your incentives..how far is the possibility of me getting my gratuity.. if you could help me I'll be obliged.. also if you could reply to me on I'll appreciate.. Kindly help me to get my dues.
Posted 12th June 2009 From India, Mumbai
Dear

It is hereby informed that teacher is not an employee according to the definition as laid down under section 2(e) of the Payment of Gratuity Act,1972 & therefore you are not entitled to any amount of gratuity under this Act.

Regards,
R.N.Khola
Sr. Associate
Skylark Associates, Gurgaon (Haryana)
(Labour Law & Legal Consultants)
09810405361
Posted 12th June 2009 From India, Delhi
Dear Mr. Khola,
Our school has already given gratuity to other collegues of mine. also i ask for gratuity as my school collects Rs 1000/- for every new admission towards teacher's gratuity fund.. how come I'm not entitled.. Pl. can you guide me.
Posted 12th June 2009 From India, Mumbai
Dear BG,

Then in my opinion you should approach the hon'ble civil court for getting proper remedy. First serve a legal notice on the management through a civil advocate.

Regards,
R.N.Khola
Sr. Associate
Skylark Associates, Gurgaon (Haryana)
(Labour Law & Legal Consultants)
09810405361
Posted 13th June 2009 From India, Delhi
Dear Mr. Cyril / Arun/ Paresh

Your qoutes are very good and useful. I would like to get clarification about some more points.

1. It is understood that if we employ contract persons continuously for 5 years, they shall become eligible for gratuity. But what if they are served with contract termination letters every year ( ie; on completion of 12 months).

It is been noticed that certain organisations engage persons on contract for only 11 months. But these 11 months also cross the 240 days criteria. Then is there any use of restricting the contract to 11 months? Also will it work if a break in service is given for 2 or 3 days?

2. Some companies have a practice of engaging people for 6 months then give a break of 3 days( 3 days they are not allowed to work) and then they are taken back and will work for 1 year . I think this will surely prevent eligibility of gratuity. In this case they engage people only for 4 years. Since they are restricting the total years to 4 , we need to think that even if the contract is of 6 months completion of 5 years is areal matter. am I correct?

In such cases is it necessary to issue contract letters or attendance registers alone is enough to prove that employees are not in continuous service of 1 year?

3. Another point is that in case of death or disablement of an employee, 5 years continuous service is not necessary. Then what is the minimum requirement? Shouldn't he complete 1 year continuous service?


Also could any of you cite any court orders of the case ( court direction to pay gratuity to contract employee) which Mr. Cyril has mentioned.



Thank You,
Seema T.K.
Posted 21st October 2009
Dear Mr. Cyril / Arun/ Paresh

Your qoutes are very good and useful. I would like to get clarification about some more points.

1. It is understood that if we employ contract persons continuously for 5 years, they shall become eligible for gratuity. But what if they are served with contract termination letters every year ( ie; on completion of 12 months).

It is been noticed that certain organisations engage persons on contract for only 11 months. But these 11 months also cross the 240 days criteria. Then is there any use of restricting the contract to 11 months? Also will it work if a break in service is given for 2 or 3 days?

2. Some companies have a practice of engaging people for 6 months then give a break of 3 days( 3 days they are not allowed to work) and then they are taken back and will work for 1 year . I think this will surely prevent eligibility of gratuity. In this case they engage people only for 4 years. Since they are restricting the total years to 4 , we need to think that even if the contract is of 6 months completion of 5 years is areal matter. am I correct?

In such cases is it necessary to issue contract letters or attendance registers alone is enough to prove that employees are not in continuous service of 1 year?

3. Another point is that in case of death or disablement of an employee, 5 years continuous service is not necessary. Then what is the minimum requirement? Shouldn't he complete 1 year continuous service?


Also could any of you cite any court orders of the case ( court direction to pay gratuity to contract employee) which Mr. Cyril has mentioned.



Thank You,
Seema T.K.
Posted 9th November 2009
4. PAYMENT OF GRATUITY.- (1) Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years, - (a) on his superannuation, or

(b) on his retirement or resignation, or

(c) on his death or disablement due to accident or disease : Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement :

Provided further that in the case of death of the employee, gratuity payable to him shall be paid to his nominee or, if no nomination has been made, to his heirs, and where any such nominees or heirs is a minor, the share of such minor, shall be deposited with the controlling authority who shall invest the same for the benefit of such minor in such bank or other financial institution, as may be prescribed, until such minor attains majority.

Explanation : For the purposes of this section, disablement means such disablement as incapacitates an employee for the work which he was capable of performing before the accident or disease resulting in such disablement.

(2) For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days' wages based on the rate of wages last drawn by the employee concerned : Provided that in the case of a piece-rated employee, daily wages shall be computed on the average of the total wages received by him for a period of three months immediately preceding the termination of his employment, and, for this purpose, the wages paid for any overtime work shall not be taken into account :
Posted 28th November 2009 From India, Hyderabad
Dear Mr. Bobby
I'm Bharti. I've been hearing various suggestions on gratuity laws pl. do u know anyone who could suggest or guide me correctly if teachers are entitled for gratuity or no... Going through various sites ,sometime i understand that Law has been revised and teachers are entitled for gratuity.. But my principal refused to pay me saying I've resigned after 20 yrs of service and that shes not bound to pay me. i served her legal notice but still she refused to pay..what are the possibilities of me getting gratuity..
Posted 29th November 2009 From India, Mumbai
hi seniors , I have a doubt if the employee is entitled for gratuity, who is working in a Project work and the project is not yet completed, i.e Project is in commissioning state. Kindly reply
Posted 30th December 2009 From India, Guwahati
Dear Miss. Smita,

You have not mentioned the nature of your project work. Whether any construction work is going on ? Therefore, you are advised to go through section 1 of the P G Act, 1972 on applicability.

With Regards,
R.N.Khola
Sr. Associate(LL & IR)
Skylark Associates, Gurgaon (Haryana)
(Labour Law Consultants)
Office: 311, AKD Tower, Sector 14, Gurgaon
(M) 09810405361 (O) 0124-4264449
Posted 30th December 2009 From India, Delhi
Sir,

The project is to set up a Plant which will produce Iron rods and the particular employee is in Civil Department. Though few of the project has been completed but the opertion is not yet started full fledge.

Please reply
Posted 30th December 2009 From India, Guwahati
Dear Smita,

After going through section 1(3) of the Payment of Gratuity Act, 1972 it does not seems to be covered under this Act.

Opinion/ comments submitted as requested.

With Regards,
R.N.Khola
Sr. Associate(LL & IR)
Skylark Associates, Gurgaon (Haryana)
(Labour Law Consultants)
Office: 311, AKD Tower, Sector 14, Gurgaon
(M) 09810405361
Posted 1st January 2010 From India, Delhi
krmrao 
Hi Gopalanis

Section 2 (e) ( Maharastra Employees of Private Schools (Conditions of Service) Regulations Act, 1977 - Sec.2(17) amd (26)- The definition of "Employee" under Section 2(e) of the Act, includes and covers in its compass the class of teachers employed in an establishment of a school and therefore entitled to the benefits of payment of gratuity.

Maharastra Employees of Private Schools ( Conditions of Service Regulations) Act, 1977 is a special statute for the benefit of the school employees, School managemetn, the society and the standard of education.

The Provisions of MEPS Act will have to be simultaneously read with the provisions of the Payment of Gratuity Act, as mutually supplemental to each other to achieve the object of the enactments and the constitutional goal mandated in Chapter 4 of the Schools Act. Therefore, it was held that the Payment of Gratuity Act applies to all employees and teachers of the recognized schools governed by the State Act. The respondent - teachers were held entitled to receive their gratuity from the petitioners accordingly.

Case: General Education Academy, Chembur, Mumbai- V - Sudha Vasudeo Desai and others. 2001 (11) L.L.J. 273 (BOM).

AT THE SAME TIME THE UNDER GIVEN CASE JUDGEMENTS SAY TEACHERS ARE NOT ENTITLED FOR GRATUITY BENEFITS AS THEY ARE NOT EMPLOYEES.

1_) Section 2(e) - Educational Institutions also employ persons other than teachers. Section 4 of the Act requires payment of gratuity of an "employee" and unless a person is an "employee", as per the definition contained in Section 2(i), he can have no claim for gratuity. The respondents - retired teachers (not being such employees) were held not entitled to claim gratuity under the Gratuity Act. CASE PRONOUNCED " H.E. Education Socierty , Barkheda. Bhopal - V - Appellate Authority under Payment of Gratuity Act and Another, (2001) 1. L.L.J. 691 (M.P).

2) Section 2(e) of Gratuity Act _ The authority below was held to have exceeded its jurisdiction in conferring the benefit of the ACt to a teacher although such teacher cannot be said to be an employee within the meaning of the Act. A teacher educates children, he moulds their character, builds up their personality and makes them fit to become responsible citizens. Thus a teacher cannot be termed as an employee. CASE HELD " Seth Soorajmal Jalan Balika Vidyalaya (Secondary School) and Another - V - Controlling Authority and others. ( 2001) I. L.L.J. 1249 (Cal).

I suggest you to kindly go through your respective State Act to understand whether an provision is given to schools teacher to get gratuity benefits.

Mohan Rao
Manager HR
Posted 1st January 2010 From India, Visakhapatnam
Hi All,

I have a questions. I am working in a software firm. One of our employee worked with India office for 2 yrs, was sent on H1 B to US office for 2 yrs rejoined India office to work for 1.5 yrs. Is this employee eligible for gratuity?

Thank you
Sirisha
Posted 21st April 2010 From India, Hyderabad
Dear Sirisha,

If the employer have worked with the same employer for five years or more continuously with out any break in service/ with out taking any full & final in between the service period as per section 2A of the P G Act, 1972 then he is eligible to have gratuity from the employer.

With Regards,
R.N.Khola
Sr. Associate (LL & IR)
Skylark Associates, Gurgaon (Haryana)
(Labour Law Consultants)
Office: 311, AKD Tower, Sector 14, Gurgaon
(M) 09810405361 (O) 0124-4264449

Posted 21st April 2010 From India, Delhi
As far as concern about the applicability of Gratuity in respect of Contractual Employee, in my opinion the same is applicable. Let me clarify the same. first will go throught he applicabily section of the Act which says that:-
1,(3)(b);- Every shop or establishment within the meaning of any law for the time being in force in relation to shops and establishment in a state, in which ten or more persons are employeed, or were employed,on any day of the preceding twelve months;-
(c) such other establishment or class of establishment ,in which ten or more employees are employed ,or were employed, on any day of the preceding of twelve months,as the central Govt may by notification,specify in this behalf.

Now please go through the defination of employee within the same act as says;-
2(e) Employee means any person(other than an apprentice) employed on wages in any establishment,factory mine,oilfield,Plantation,port,railway company or shop, to do any skilled,semiskilled,or unskilled,manual,supervisory,technical,or clerical work,whether the term of employment are empressed or implied,(and whether or not such person is employed in a managerial or administrative capacity, but does not include any such person who hold a post under central Govt or a state govt.and is governed by any other Act or by any rules providing for payment of Gratuity.

So if we take in consideration of both these two section, it is clear that there is no inclusion of contractual employee from the defination of employees, the same is implicit within the defination of employee under the Act, any person employed irespective of their status is eligible for payment gratuity subject to condition of 5 years of sevice. there are also judicial pronauncement the same has been held, i will come with that latter.

in case of Payment of Bonus Act the same is also applicable to contract labour, it has been held by Supreme Court. i have gone through those judgments. will clarify you.

Regard
Sanjay
Posted 22nd April 2010 From ,
Gratuity For Contract Labour
Dear friends,
It is agreed that Gratuity is not payable for service less than five years. Since contract labour as the name suggests is supposed to be for just short periods, perhaps for this reason it was not included in the Payment of Gratuity Act. However, Section 25 F (b) of the Industrial Disputes Act, 1947 clearly mandates that the workman has been paid at the time of retrenchment compensation which shall be equivalent to fifteen days average pay for every completed year of continuous service or any part thereof in excess of six months; and
Thus every contract worker becomes entitled for this compensation , which in a way compensates the worker, may be not fully.
Shimlacharlie
Posted 16th May 2010 From India, Delhi
I have a question for all law experts out there. The term teacher has not been included in the definition of employee under the Payment of gratuity Act. How will a recently retired teacher from private school prove that he/she is eligible for gratuity. What references should be given for that.
Posted 1st June 2010 From India, Chandigarh
Dear Madam / Sir,

Hi, I have a question connected to the topic.

A person over superannuation age (he is 60 Yrs of age) has joined our company.

Is the company to make provision for gratuity in his case?

Will he be entitled for gratuity in case he serves for 5 yrs?

Thanks & Regards
Major.Ashish Acharjee
Posted 20th August 2010 From India, Pune






 
 
 
 







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