Labour Laws & Ir
Manager - Human Resource
Executive Admin & Hr
Labour Laws And Financial Matters
J.Gopi Krishna
Dgm Hr & Ir
Sr.manager - Hr
+4 Others

Dear Friends
I am having a question whether Gratuity is applicable to the Labour engaged through a contractor under Contract Labour Regulation & Abolition Act? For more clear I have engaged one security Guard through a security Agency under Contract Labour Regulation & Abolition Act. I have not registered under the CLRA Act since I have not engaged 20 or more like wise my Agency has also not got the license since they have not deployed 20 or more persons to my establishment and more over I have not issued any Form V as required under the Act. Under the above scenrio I am in doubt whether that security guard engaged through a Security Agency is a contract labour governed under the provisions of CLRA Act or not? If he is governed under the CLRA Act whether Grautuity is payable to him or not ? He had already completed 5 yrs of service and left on his own accord. Kindly clarify

From India, Hyderabad
Your saying right, it not comes under the Contract Labour Act. but, He is working under some other organization so, that organization has to pay the Gratuity to him.
Generaly every contractor make the agreement, that time they are mentioning the paying details toward the employees & contractor also.
contractor paying the PF, ESIC, PT, etc. directly by him self, but same thing they are recover the same by the principle employer.
so, first of fall, you need to see the contract copy of same.
secondly, if any contractor is not able to pay any statutory payments, so, all liability pay comes to principle employer only.
But, If it is not registered under the Contract Labour Act. so, it is not consider as the legal matter.
But, generally it pay by the contractor directly & contractor recover the same by principle employer.

From India, Mumbai
Dear Friends,

CLRA and PGA are two distinct and independent legislations. They do not export or import any definitions. They do not have inter-dependable provisions except section 21(4) of CLRA. Hence, let us not mix the two. Section 21(4) provides PE’s responsibility to pay statutory benefits if contractor fails. In the instant case this section shall not come into play as the establishment of PE employs less than twenty contract labour and CLRA is not applicable.

Under PGA, there is no concept of contractor or indirect employees. If contract is genuine, realistic and not sham and not fraudulent responsibility to pay gratuity is on contractor in his capacity to be employer for the ‘contract worker’.

However, security service provider has to check applicability of the PGA on his establishment. To invite applicability, he must employ minimum ten or more employees (….in his all sites and offices) and must be a shop and establishment under the respective law of the state or an establishment notified by the central government under PGA.

If PGA not found to be applicable on security service provider’s establishment, the security guard shall not be eligible for gratuity.

P K Jadia

I agree CLRA & PGA are separate and distinct labour legislations. The PGA is applicable to establishment employing more than 10 persons it is covered under the legisation. Thus the Security Agency if it has more than 10 employees is covered under the PGA and the concerned security gaurd has more than 5 years continous service is eligible for gratuity on cessation of his employment. The liability to pay gratuity lies with the contractor primarily and in the event the contractor fails to meet the obligation it will fall on the principal employer under the CLRA. Regards,
Ashok K. Ghose

From India
Dear Ashok K. Ghose, Would you please let us know under which of the Section or Rule of the C L (R&A) Act this liability will fall upon the Principal Employer. Regards, R.N.Khola
From India, Delhi
Under sub-clause (4) Section 21 of the C L (R&A) Act, a responsibility is cast upon the PE to make the payment of wages if the Contractor fails to pay wages which under the definition of "wages" under the C L (R&A) Act state that definition of wages under the Payment of Wages Act (POWA) shall be applicable.
Section 2 of the POWA states the definition of WAGES …"any sum which by reason of the termination of employment of the person employed is payable under any law, contract or instrument which provides for the payment of such sum whether with or without deductions but does not provide for the time within which the payment is to be made;
Therefore, considering the definition of wages under the POWA the same covers gratuity which is payable upon termination of services under the Payment of Gratuity Act, under the C L (R&A) Act, responsibility is cast upon the PE to make payment of gratuity if the Contractor fails to pay the same.

From India, Pune
Dear R.N.Khola,
The liabiltiy of payment of Gratutiy to the contract labour does not fall on the principal employer basing on CL (R& A), but on basing on Payment of Gratutity Act. As per the payment of Gratuity act, once any employee completes 5 year of service (all kind of employment i.e., contractual, permanent) are eligible to get the gratuity.
Gopi Krishna HR

From India, Mumbai
The answer to your first question is yes, hospital has to pay the gratuity if the same is covered under the terms of his employment.
The answer to your 2nd question is the hospital shall be bound to pay the gratuity if the same is not paid by the Doc's Contractor who has placed the Doctor in the Hospital. Alternatively, if the Doctor is working on a consultancy basis, the hospital need not pay the gratuity.

From India, Pune
Please note that under any circumstances the liability of below payments does not fall on the PE-
1. Bonus
2. Gratuity
3. Retrenchment Compensation, if any;
4. Wages in lieu of Notice period.
Salil Sharma
099102 47001

From India, Delhi
Dear All,

The payment of gratuity is linked with a concept, that if someone renders / offers his continuous service for more than 5 years to a particular establishment, then as a gesture of goodwill, he certainly deserves some appreciation. Thus to extend his gratitude the employer, makes some payment, as a token of appreciation for long association / service to the employee. To shape up or streamline this concept, our legislators enacted this into a peace of legislation, termed as '' The Payment of Gratuity Act, 1972''. This is a central act, and an independent peace of legislation. On the plain reading of Section 2(e), of the Act, i.e the definition of 'employee', the word 'contract employee' is not seen. Which means, the employees engaged by the contarctor, per se are not covered under the Act.

Similarly, the contract employees (which is a subject matter under contract labour Act)being the employee of contractor, the contractor is at his liberty to move them from one establishment to other. Thus, even if the contract employee remains in continuous employment of a contractor, he is rendering his uninterepted service to his employer, i.e the 'Contaractor'. In many of the contractual services like security, canteen, garden maint., house keeping, packing, the contractor keeps his employees moving at different locations. That shows the contract employee is offering his service to a particular contractor.

One of our friend has stated that, it is the liability of principal employer to pay gratuity, in case the contractor fails to make the payment. I feel he wanted to say in different context. As in Maharashtra, many of the industries like textile, residual and some Engg. industries are covered under the BIR, Act, where the definition of 'employee' covers even the contractor employee also. Further, some case laws under the CL(R & A) Act, shows that in case, the contractor fails to make payment to his employees statutory dues, its the liability of principal employer to pay. But, we haven't come across any such specific case law relating to gratuity payment being made by principal employer.

I am of the opinion, that contractors employee is not the liability of principal employer to pay as far as the issue relating to gratuity payment is concerned. This can be validated with a reasoning that any establishment engages the contract employees, for a specific nature of job, and for a specified period, with specific nos., by signing an agreement, and by complying with provisions under CL (R & A) Act. The establishment looks to it, that the services being given on contract are of not permenant nature & duration, rather sort of support services, which are like security, canteen, transport, packing, house keeping, garden maint.,loading,stacking etc... . Any industry off loads / outsources such support services to a contractor/vendor by following prescribed provisions under the CL (R & A) Act, which is again a seperate enactment. Thus, to talk about security service it can certainly be given on contract. The contractor keeps them on rotation by moving them at various locations, hence we can conclude for such services even if liability comes for gratuity, it is for the contractor to pay, and not for principal employer.

In Maharashtra, for regulating the employment of private security guards employed in factories and establishment, the security agency has to get it registered under ''The Maharashtra Private Security Guards (Regulation of employment & welfare) Act, 1981.'' This is a board, which declares min. wages for private security guards, and takes care of such issues... its like mathadi board.

Please do not engage contract workers on a continious uninerpted service of more than 5 + years.....then, you have no reason to call them contract employees.

Warm Regards

Suhas Garde



This discussion thread is closed. If you want to continue this discussion or have a follow up question, please post it on the network.
Add the url of this thread if you want to cite this discussion.

About Us Advertise Contact Us
Privacy Policy Disclaimer Terms Of Service

All rights reserved @ 2021 Cite.Co™