I have the following views on the Payment of Gratuity Act 1972.
a) whether the 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 the 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, the expiry of the tenure of employment is not a defined occurrence for the 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
From India, Ahmadabad
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5a) whether the 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 the 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, the expiry of the tenure of employment is not a defined occurrence for the 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
From India, Ahmadabad
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Hi Hari,
Your interpretation is correct, and as long as the person is not an employee of the company, he is not eligible for Gratuity benefits. I will send you the relevant doc shortly.
Regards,
Rajendra Sappa
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Your interpretation is correct, and as long as the person is not an employee of the company, he is not eligible for Gratuity benefits. I will send you the relevant doc shortly.
Regards,
Rajendra Sappa
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Hi Hari,
You have raised a very interesting point. Technically, the non-renewal of a 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 gratuity upon completion of 5 years of continuous service. His non-renewal of the contract may perhaps be treated as his retirement from service.
Regarding Fixed-term employment, the Act clearly provides that if an employee ceases to be in employment before completing 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 a dispute over the payment of gratuity to contract labor even after completion of 5 years of service. The matter was referred to the Assistant Labour Commissioner, who directed us to make the payment as per the provisions of the Gratuity Act. I am sure there must be High Court/Supreme Court rulings on this subject. I will look into this and provide you with further feedback.
Cyril
From India, Nagpur
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You have raised a very interesting point. Technically, the non-renewal of a 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 gratuity upon completion of 5 years of continuous service. His non-renewal of the contract may perhaps be treated as his retirement from service.
Regarding Fixed-term employment, the Act clearly provides that if an employee ceases to be in employment before completing 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 a dispute over the payment of gratuity to contract labor even after completion of 5 years of service. The matter was referred to the Assistant Labour Commissioner, who directed us to make the payment as per the provisions of the Gratuity Act. I am sure there must be High Court/Supreme Court rulings on this subject. I will look into this and provide you with further feedback.
Cyril
From India, Nagpur
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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
From India, Bahadurgarh
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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
From India, Bahadurgarh
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I agree with points of Mr. Hari. Gratuity should not be payable to a contractual employee. We have appointed one labor contractor for providing housekeeping services for one year 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 the principal 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
From India, Mumbai
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Can anyone support the above with some cases/law? Law is written, but it is the interpretation which differs and creates confusion.
Regards, Priyanka
From India, Mumbai
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Dear Mr. Hari,
My views are:
Considering the Contractor as a separate entity, workers working with the contractors would be eligible for Gratuity from the contractor subject to compliance of other mandatory conditions like completion of continuous five years of service, etc.
Since this is also a social security legislation, if the contractor fails to pay the amount of gratuity, the worker would raise the demand before the principal employer.
It is then the contractor's responsibility to get the amount of gratuity from the respective employers (as a part of commercial terms he has to ensure) for the period/tenure such worker is deployed.
Kindly respond if the views are clear and logical.
Regards,
ACCHR
From India, Mumbai
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My views are:
Considering the Contractor as a separate entity, workers working with the contractors would be eligible for Gratuity from the contractor subject to compliance of other mandatory conditions like completion of continuous five years of service, etc.
Since this is also a social security legislation, if the contractor fails to pay the amount of gratuity, the worker would raise the demand before the principal employer.
It is then the contractor's responsibility to get the amount of gratuity from the respective employers (as a part of commercial terms he has to ensure) for the period/tenure such worker is deployed.
Kindly respond if the views are clear and logical.
Regards,
ACCHR
From India, Mumbai
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Hi Hari,
"Applicable" and "eligible" have a lot of difference. The gratuity act will be applicable to all employees when they have completed one year of service, but they will be eligible for gratuity after five years of service.
Santhosh Nk
ABB
From India
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"Applicable" and "eligible" have a lot of difference. The gratuity act will be applicable to all employees when they have completed one year of service, but they will be eligible for gratuity after five years of service.
Santhosh Nk
ABB
From India
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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
From India, Ahmadabad
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From India, Ahmadabad
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Hi,
Very simple, dear. If any employee (i.e. directly, probe, ad-hoc, daily wages, badli, casual, contractual, and fixed) completes 1 year, then the Gratuity Act is applicable. After completing 5 years of service, the employee becomes compulsorily eligible for Gratuity Act. In short, dear, please read the definition of an employee under the said Act. This is your proper solution. Is it clear? If you have any queries regarding labor laws, you can email me at pareshvyas04@yahoo.co.in.
With regards,
Paresh M. Vyas
Advocate & Labour Laws Consultant (M)
From India, Mumbai
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Very simple, dear. If any employee (i.e. directly, probe, ad-hoc, daily wages, badli, casual, contractual, and fixed) completes 1 year, then the Gratuity Act is applicable. After completing 5 years of service, the employee becomes compulsorily eligible for Gratuity Act. In short, dear, please read the definition of an employee under the said Act. This is your proper solution. Is it clear? If you have any queries regarding labor laws, you can email me at pareshvyas04@yahoo.co.in.
With regards,
Paresh M. Vyas
Advocate & Labour Laws Consultant (M)
From India, Mumbai
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Dear Pareshbhai,
Thanks a lot for the quick reply. However, Dear Sir, what about the following issues:
Does gratuity apply to contractual employment for a fixed tenure of employment? What about in the case of death? If death occurs, then would gratuity be payable up to 58 years/retirement or until the duration of the fixed tenure?
If we have supporting judgments regarding the above, I will be very thankful to the group.
Thanks
From India, Ahmadabad
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Thanks a lot for the quick reply. However, Dear Sir, what about the following issues:
Does gratuity apply to contractual employment for a fixed tenure of employment? What about in the case of death? If death occurs, then would gratuity be payable up to 58 years/retirement or until the duration of the fixed tenure?
If we have supporting judgments regarding the above, I will be very thankful to the group.
Thanks
From India, Ahmadabad
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This is Bharti. I've just joined this forum. I have a few requests to make. I worked as a teacher in the kindergarten section of a full-fledged SSC school for 20 years, from 1988 to 2008. I resigned from my job along with a couple of other colleagues. One colleague had completed about 7 years as a clerk in the school, and the other about 8 years as a KG teacher. Friends of mine have submitted a request along with a copy of the Gratuity Act, but there has been no response from the school's management. Verbally, we were told that the act does not state that the school is liable to pay gratuity. It seems that if you resign from the job, you forgo your incentives. We can't find a way out of this situation other than to give up our rights. Can anyone please help?
From India, Mumbai
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From India, Mumbai
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Dear Paresh Bhai,
Could you please reply to my query regarding the Gratuity Act of 1972? As per my understanding, individuals working in railways, shops, factories, mines, etc., are eligible for gratuity after completing a minimum of 5 years of service. I have worked in a school in the kindergarten section for over 20 years. Upon resigning from my position as a teacher, my principal argues that since there is no mention of schools in the act, I am not eligible for gratuity. Despite my colleagues who resigned receiving their gratuities, she insists that it was an error made in the past and that the management will not repeat it by releasing my gratuity. She also contends that upon resignation, I have given up my incentives.
What are the chances of me receiving my gratuity? Any assistance from you would be greatly appreciated. If possible, kindly respond to me at gopalanis@hotmail.com. I would be grateful for your help in securing what is due to me.
Thank you.
From India, Mumbai
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Could you please reply to my query regarding the Gratuity Act of 1972? As per my understanding, individuals working in railways, shops, factories, mines, etc., are eligible for gratuity after completing a minimum of 5 years of service. I have worked in a school in the kindergarten section for over 20 years. Upon resigning from my position as a teacher, my principal argues that since there is no mention of schools in the act, I am not eligible for gratuity. Despite my colleagues who resigned receiving their gratuities, she insists that it was an error made in the past and that the management will not repeat it by releasing my gratuity. She also contends that upon resignation, I have given up my incentives.
What are the chances of me receiving my gratuity? Any assistance from you would be greatly appreciated. If possible, kindly respond to me at gopalanis@hotmail.com. I would be grateful for your help in securing what is due to me.
Thank you.
From India, Mumbai
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Dear,
It is hereby informed that a teacher is not considered an employee as per the definition 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
Labour Law & Legal Consultants
09810405361
From India, Delhi
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It is hereby informed that a teacher is not considered an employee as per the definition 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
Labour Law & Legal Consultants
09810405361
From India, Delhi
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Dear Mr. Khola,
Our school has already given gratuity to other colleagues of mine. Also, I ask for gratuity as my school collects Rs 1000/- for every new admission towards the teacher's gratuity fund. How come I'm not entitled? Could you please guide me?
Thank you.
From India, Mumbai
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Our school has already given gratuity to other colleagues of mine. Also, I ask for gratuity as my school collects Rs 1000/- for every new admission towards the teacher's gratuity fund. How come I'm not entitled? Could you please guide me?
Thank you.
From India, Mumbai
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Dear BG,
In my opinion, you should approach the honorable civil court to seek proper remedy. First, serve a legal notice on the management through a civil advocate.
Regards,
R.N.Khola
(Labour Law & Legal Consultants)
09810405361
From India, Delhi
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In my opinion, you should approach the honorable civil court to seek proper remedy. First, serve a legal notice on the management through a civil advocate.
Regards,
R.N.Khola
(Labour Law & Legal Consultants)
09810405361
From India, Delhi
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Dear Mr. Cyril, Arun, Paresh,
Your quotes 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 (i.e., on completion of 12 months)?
It has been noticed that certain organizations engage persons on contract for only 11 months. But these 11 months also cross the 240-day 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 for gratuity. In this case, they engage people only for 4 years. Since they are restricting the total years to 4, we need to consider that even if the contract is for 6 months, completion of 5 years is a real matter. Am I correct?
In such cases, is it necessary to issue contract letters, or are attendance registers alone enough to prove that employees are not in continuous service for 1 year?
3. Another point is that in case of death or disablement of an employee, 5 years of continuous service is not necessary. Then what is the minimum requirement? Shouldn't he complete 1 year of continuous service?
Also, could any of you cite any court orders in the case (court direction to pay gratuity to contract employee) which Mr. Cyril has mentioned?
Thank you,
Seema T.K.
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Your quotes 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 (i.e., on completion of 12 months)?
It has been noticed that certain organizations engage persons on contract for only 11 months. But these 11 months also cross the 240-day 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 for gratuity. In this case, they engage people only for 4 years. Since they are restricting the total years to 4, we need to consider that even if the contract is for 6 months, completion of 5 years is a real matter. Am I correct?
In such cases, is it necessary to issue contract letters, or are attendance registers alone enough to prove that employees are not in continuous service for 1 year?
3. Another point is that in case of death or disablement of an employee, 5 years of continuous service is not necessary. Then what is the minimum requirement? Shouldn't he complete 1 year of continuous service?
Also, could any of you cite any court orders in the case (court direction to pay gratuity to contract employee) which Mr. Cyril has mentioned?
Thank you,
Seema T.K.
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Dear Mr. Cyril, Arun, Paresh,
Your quotes 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 (i.e., on completion of 12 months)?
It has been noticed that certain organizations engage persons on contract for only 11 months. But these 11 months also cross the 240-day 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 for gratuity. In this case, they engage people only for 4 years. Since they are restricting the total years to 4, we need to consider that even if the contract is for 6 months, completion of 5 years is a real matter. Am I correct?
In such cases, is it necessary to issue contract letters, or attendance registers alone are enough to prove that employees are not in continuous service of 1 year?
3. Another point is that in the case of death or disablement of an employee, 5 years of continuous service is not necessary. Then what is the minimum requirement? Shouldn't he complete 1 year of continuous service?
Also, could any of you cite any court orders of the case (court direction to pay gratuity to a contract employee) which Mr. Cyril has mentioned.
Thank You,
Seema T.K.
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Your quotes 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 (i.e., on completion of 12 months)?
It has been noticed that certain organizations engage persons on contract for only 11 months. But these 11 months also cross the 240-day 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 for gratuity. In this case, they engage people only for 4 years. Since they are restricting the total years to 4, we need to consider that even if the contract is for 6 months, completion of 5 years is a real matter. Am I correct?
In such cases, is it necessary to issue contract letters, or attendance registers alone are enough to prove that employees are not in continuous service of 1 year?
3. Another point is that in the case of death or disablement of an employee, 5 years of continuous service is not necessary. Then what is the minimum requirement? Shouldn't he complete 1 year of continuous service?
Also, could any of you cite any court orders of the case (court direction to pay gratuity to a contract employee) which Mr. Cyril has mentioned.
Thank You,
Seema T.K.
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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 are minors, the share of such minors shall be deposited with the controlling authority who shall invest the same for the benefit of such minors in such bank or other financial institution, as may be prescribed, until such minors attain 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.
From India, Hyderabad
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(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 are minors, the share of such minors shall be deposited with the controlling authority who shall invest the same for the benefit of such minors in such bank or other financial institution, as may be prescribed, until such minors attain 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.
From India, Hyderabad
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Dear Mr. Bobby,
I'm Bharti. I've been hearing various suggestions on gratuity laws. Could you please let me know if teachers are entitled to gratuity? I have come across conflicting information. Some sources indicate that the law has been revised to include teachers for gratuity, however, my principal has refused to pay me by claiming that I resigned after 20 years of service and she is not obligated to provide gratuity. I have sent her a legal notice, but she still refuses to pay. What are the chances of me receiving the gratuity?
Thank you.
From India, Mumbai
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I'm Bharti. I've been hearing various suggestions on gratuity laws. Could you please let me know if teachers are entitled to gratuity? I have come across conflicting information. Some sources indicate that the law has been revised to include teachers for gratuity, however, my principal has refused to pay me by claiming that I resigned after 20 years of service and she is not obligated to provide gratuity. I have sent her a legal notice, but she still refuses to pay. What are the chances of me receiving the gratuity?
Thank you.
From India, Mumbai
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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
From India, Guwahati
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From India, Guwahati
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Dear Miss Smita,
You have not mentioned the nature of your project work. Is any construction work currently ongoing? Therefore, you are advised to go through Section 1 of the P G Act, 1972, on applicability.
With Regards,
R.N. Khola
From India, Delhi
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You have not mentioned the nature of your project work. Is any construction work currently ongoing? Therefore, you are advised to go through Section 1 of the P G Act, 1972, on applicability.
With Regards,
R.N. Khola
From India, Delhi
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Sir,
The project is to set up a plant that will produce iron rods, and the particular employee is in the Civil Department. Although a few of the project tasks have been completed, the operation has not yet started full-fledged.
Please reply.
From India, Guwahati
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The project is to set up a plant that will produce iron rods, and the particular employee is in the Civil Department. Although a few of the project tasks have been completed, the operation has not yet started full-fledged.
Please reply.
From India, Guwahati
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Dear Smita,
After going through section 1(3) of the Payment of Gratuity Act, 1972, it does not seem to be covered under this Act.
Opinion/comments submitted as requested.
With Regards,
R.N. Khola
From India, Delhi
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After going through section 1(3) of the Payment of Gratuity Act, 1972, it does not seem to be covered under this Act.
Opinion/comments submitted as requested.
With Regards,
R.N. Khola
From India, Delhi
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Hi Gopalanis,
Section 2(e) of the Maharashtra Employees of Private Schools (Conditions of Service) Regulations Act, 1977 - Sec.2(17) and (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.
The Maharashtra Employees of Private Schools (Conditions of Service Regulations) Act, 1977 is a special statute for the benefit of school employees, school management, the society, and the standard of education.
The provisions of the 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 UNDERGIVEN CASE JUDGMENTS SAY TEACHERS ARE NOT ENTITLED TO 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 to 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 Society, 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 the Gratuity Act - The authority below was held to have exceeded its jurisdiction in conferring the benefit of the Act to a teacher, although such a teacher cannot be said to be an employee within the meaning of the Act. A teacher educates children, molds 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 go through your respective State Act to understand whether a provision is given to school teachers to get gratuity benefits.
Mohan Rao
Manager HR
From India, Visakhapatnam
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Section 2(e) of the Maharashtra Employees of Private Schools (Conditions of Service) Regulations Act, 1977 - Sec.2(17) and (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.
The Maharashtra Employees of Private Schools (Conditions of Service Regulations) Act, 1977 is a special statute for the benefit of school employees, school management, the society, and the standard of education.
The provisions of the 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 UNDERGIVEN CASE JUDGMENTS SAY TEACHERS ARE NOT ENTITLED TO 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 to 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 Society, 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 the Gratuity Act - The authority below was held to have exceeded its jurisdiction in conferring the benefit of the Act to a teacher, although such a teacher cannot be said to be an employee within the meaning of the Act. A teacher educates children, molds 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 go through your respective State Act to understand whether a provision is given to school teachers to get gratuity benefits.
Mohan Rao
Manager HR
From India, Visakhapatnam
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Hi All,
I have a question. I am working in a software firm. One of our employees worked with the India office for 2 years, was sent on an H1B to the US office for 2 years, and rejoined the India office to work for 1.5 years. Is this employee eligible for gratuity?
Thank you,
Sirisha
From India, Hyderabad
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I have a question. I am working in a software firm. One of our employees worked with the India office for 2 years, was sent on an H1B to the US office for 2 years, and rejoined the India office to work for 1.5 years. Is this employee eligible for gratuity?
Thank you,
Sirisha
From India, Hyderabad
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Dear Sirisha,
If the employee has worked with the same employer for five years or more continuously without any break in service or without taking any full and final settlement in between the service period as per Section 2A of the Payment of Gratuity Act, 1972, then they are eligible to receive gratuity from the employer.
With Regards,
R.N. Khola
Hi All,
I have a question. I am working in a software firm. One of our employees worked in the India office for 2 years, was then sent on an H1B to the US office for 2 years, and rejoined the India office to work for 1.5 years. Is this employee eligible for gratuity?
Thank you,
Sirisha
From India, Delhi
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If the employee has worked with the same employer for five years or more continuously without any break in service or without taking any full and final settlement in between the service period as per Section 2A of the Payment of Gratuity Act, 1972, then they are eligible to receive gratuity from the employer.
With Regards,
R.N. Khola
Hi All,
I have a question. I am working in a software firm. One of our employees worked in the India office for 2 years, was then sent on an H1B to the US office for 2 years, and rejoined the India office to work for 1.5 years. Is this employee eligible for gratuity?
Thank you,
Sirisha
From India, Delhi
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As far as the concern about the applicability of Gratuity in respect of Contractual Employee, in my opinion the same is applicable. Let me clarify the same. First, I will go through the applicability 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 establishments in a state, in which ten or more persons are employed, 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 twelve months, as the central Govt may by notification, specify in this behalf.
Now please go through the definition of an employee within the same act as it 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 terms of employment are expressed or implied, (and whether or not such a person is employed in a managerial or administrative capacity but does not include any such person who holds 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 into consideration of both these two sections, it is clear that there is no inclusion of contractual employees from the definition of employees, the same is implicit within the definition of an employee under the Act, any person employed irrespective of their status is eligible for payment of gratuity subject to the condition of 5 years of service. There are also judicial pronouncements on the same which has been held, I will come with that later.
In the case of the Payment of Bonus Act, the same is also applicable to contract labor; it has been held by the Supreme Court. I have gone through those judgments and will clarify for you.
Regards,
Sanjay
From India, Delhi
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1,(3)(b): Every shop or establishment within the meaning of any law for the time being in force in relation to shops and establishments in a state, in which ten or more persons are employed, 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 twelve months, as the central Govt may by notification, specify in this behalf.
Now please go through the definition of an employee within the same act as it 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 terms of employment are expressed or implied, (and whether or not such a person is employed in a managerial or administrative capacity but does not include any such person who holds 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 into consideration of both these two sections, it is clear that there is no inclusion of contractual employees from the definition of employees, the same is implicit within the definition of an employee under the Act, any person employed irrespective of their status is eligible for payment of gratuity subject to the condition of 5 years of service. There are also judicial pronouncements on the same which has been held, I will come with that later.
In the case of the Payment of Bonus Act, the same is also applicable to contract labor; it has been held by the Supreme Court. I have gone through those judgments and will clarify for you.
Regards,
Sanjay
From India, Delhi
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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 25F(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.
Thus, every contract worker becomes entitled to this compensation, which, in a way, compensates the worker, maybe not fully.
Shimlacharlie
From India, Delhi
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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 25F(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.
Thus, every contract worker becomes entitled to this compensation, which, in a way, compensates the worker, maybe not fully.
Shimlacharlie
From India, Delhi
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I have a question for all law experts out there. The term "teacher" has not been included in the definition of an employee under the Payment of Gratuity Act. How will a recently retired teacher from a private school prove that he/she is eligible for gratuity? What references should be given for that.
From India, Chandigarh
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From India, Chandigarh
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Dear Madam/Sir,
I have a question connected to the topic. A person over superannuation age (he is 60 years of age) has joined our company. Is the company required to make provision for gratuity in his case? Will he be entitled to gratuity if he serves for 5 years?
Thanks & Regards,
Major Ashish Acharjee
From India, Pune
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I have a question connected to the topic. A person over superannuation age (he is 60 years of age) has joined our company. Is the company required to make provision for gratuity in his case? Will he be entitled to gratuity if he serves for 5 years?
Thanks & Regards,
Major Ashish Acharjee
From India, Pune
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Dear Major Ashish,
In my opinion, there is no bar as far as age is concerned in the case of eligibility for gratuity. He will be entitled to receive gratuity if he works continuously for five years with the same employer where this act is applicable.
Regards,
R.N.Khola
Dear Madam/Sir,
I have a question connected to the topic. A person over the superannuation age (he is 60 years old) has joined our company. Is the company required to make provisions for gratuity in his case? Will he be entitled to gratuity if he serves for 5 years?
Thanks & Regards,
Major Ashish Acharjee
From India, Delhi
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In my opinion, there is no bar as far as age is concerned in the case of eligibility for gratuity. He will be entitled to receive gratuity if he works continuously for five years with the same employer where this act is applicable.
Regards,
R.N.Khola
Dear Madam/Sir,
I have a question connected to the topic. A person over the superannuation age (he is 60 years old) has joined our company. Is the company required to make provisions for gratuity in his case? Will he be entitled to gratuity if he serves for 5 years?
Thanks & Regards,
Major Ashish Acharjee
From India, Delhi
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Dear Mr AKM, You are right but gratuity ceiling has been increased form 3.5 Lacs to 10 Lacs. Best regards
From India, Jhajjar
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From India, Jhajjar
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Dear Mr. R N Khola,
Thank you for your reply. There is still one query. As per section 4A, every non-government employer has to insure their gratuity liability by LIC or another such insurer. However, LIC does not insure the gratuity liability of individuals above 58 years of age. I am unsure whether such a practice by insurers is ethically and legally covered. If insurers are legally covered for this act, then perhaps gratuity coverage is not mandatory for individuals above 58 years of age.
Moreover, in the event that such an individual passes away after serving for a certain period, will the gratuity payable be calculated based on a minimum of 5 years? If insurers like LIC do not cover such risks, how can an employer be compelled to undertake such a risk? I would appreciate your insights on this matter.
Thanks and Regards,
Major Ashish Acharjee
From India, Pune
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Thank you for your reply. There is still one query. As per section 4A, every non-government employer has to insure their gratuity liability by LIC or another such insurer. However, LIC does not insure the gratuity liability of individuals above 58 years of age. I am unsure whether such a practice by insurers is ethically and legally covered. If insurers are legally covered for this act, then perhaps gratuity coverage is not mandatory for individuals above 58 years of age.
Moreover, in the event that such an individual passes away after serving for a certain period, will the gratuity payable be calculated based on a minimum of 5 years? If insurers like LIC do not cover such risks, how can an employer be compelled to undertake such a risk? I would appreciate your insights on this matter.
Thanks and Regards,
Major Ashish Acharjee
From India, Pune
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Dear Ashish,
It is made clear that so far it is not necessary to have insurance for gratuity payment as the government has not issued any notification for compulsory insurance under section 4A of this Act. As there is no bar relating to age in getting gratuity, I am giving this opinion that the employee is eligible to have gratuity from the employer if he completes five years of service.
According to section 4, 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. Where any such nominees or heirs are minors, the share of such minors shall be deposited with the controlling authority who shall invest the same for the benefit of such minors in such a bank or other financial institution, as may be prescribed, until such minor attains majority.
Section 4(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. I do not know much about LIC insurance. Opinion submitted as requested.
Regards,
R.N.Khola
From India, Delhi
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It is made clear that so far it is not necessary to have insurance for gratuity payment as the government has not issued any notification for compulsory insurance under section 4A of this Act. As there is no bar relating to age in getting gratuity, I am giving this opinion that the employee is eligible to have gratuity from the employer if he completes five years of service.
According to section 4, 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. Where any such nominees or heirs are minors, the share of such minors shall be deposited with the controlling authority who shall invest the same for the benefit of such minors in such a bank or other financial institution, as may be prescribed, until such minor attains majority.
Section 4(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. I do not know much about LIC insurance. Opinion submitted as requested.
Regards,
R.N.Khola
From India, Delhi
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Dear Friends,
Under the ID Act, an employee is entitled to receive fifteen days' wages from their employer for each completed year of service, irrespective of whether they are employed directly or through a contractor. According to the law, anyone who is the true master of the worker is responsible for fulfilling this obligation.
Moreover, if an employee, regardless of their status as a contract employee or otherwise, serves under the employer or the master for five years or more, they are entitled to receive fifteen days' wages for each completed year of service.
The method of calculating fifteen days' wages under the ID Act equates to half a month's wages, while under the Payment of Gratuity Act, it is computed by dividing the monthly wages by twenty-six and then multiplying the result by fifteen.
Shimlacharlie
From India, Delhi
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Under the ID Act, an employee is entitled to receive fifteen days' wages from their employer for each completed year of service, irrespective of whether they are employed directly or through a contractor. According to the law, anyone who is the true master of the worker is responsible for fulfilling this obligation.
Moreover, if an employee, regardless of their status as a contract employee or otherwise, serves under the employer or the master for five years or more, they are entitled to receive fifteen days' wages for each completed year of service.
The method of calculating fifteen days' wages under the ID Act equates to half a month's wages, while under the Payment of Gratuity Act, it is computed by dividing the monthly wages by twenty-six and then multiplying the result by fifteen.
Shimlacharlie
From India, Delhi
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Dear All,
Thank you for your replies; they were very helpful. Kindly let me know if a new employee over the age of 58 joins the company, is the provision of gratuity mandatory for him/her by the company?
From India, Pune
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Thank you for your replies; they were very helpful. Kindly let me know if a new employee over the age of 58 joins the company, is the provision of gratuity mandatory for him/her by the company?
From India, Pune
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Dear Mr. Khola,
Thank you for letting me know that teachers are covered under the amended gratuity law.
I resigned from my job in 2008 after 20 years of continuous service as a kindergarten teacher. I have filed a case against the institute, the principal, and the trustee. However, there has been no reply from their side. I keep visiting the court and getting another date for the past two months.
How long do you think this will continue? Are there any chances of getting justice?
Thank you.
From India, Mumbai
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Thank you for letting me know that teachers are covered under the amended gratuity law.
I resigned from my job in 2008 after 20 years of continuous service as a kindergarten teacher. I have filed a case against the institute, the principal, and the trustee. However, there has been no reply from their side. I keep visiting the court and getting another date for the past two months.
How long do you think this will continue? Are there any chances of getting justice?
Thank you.
From India, Mumbai
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Hi,
Let us take the case of the service industry. A company called ABC is a service provider, offering its services at XYZ, which is the client's place. The client (XYZ) is required to sign an agreement for the amount/person deployed.
Let's consider a scenario where we have deployed a supervisor at the client's place, and the client is paying us. The supervisor may be working at the client's place under contract, but they will be on our payroll. It is our responsibility to provide other opportunities if we lose the existing contract or to provide one month's pay along with a bonus and gratuity. This also depends on the salary breakdown we provide at the time of appointment.
Cheers,
balu
From India, Hyderabad
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Let us take the case of the service industry. A company called ABC is a service provider, offering its services at XYZ, which is the client's place. The client (XYZ) is required to sign an agreement for the amount/person deployed.
Let's consider a scenario where we have deployed a supervisor at the client's place, and the client is paying us. The supervisor may be working at the client's place under contract, but they will be on our payroll. It is our responsibility to provide other opportunities if we lose the existing contract or to provide one month's pay along with a bonus and gratuity. This also depends on the salary breakdown we provide at the time of appointment.
Cheers,
balu
From India, Hyderabad
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Dear Member,
If you have filed the claim case before the Authority under the Payment of Gratuity Act, 1972, then keeping in view the principle of natural justice, this authority must give an opportunity to the respondents before proceeding ex-parte. Courts take years to announce the final judgment, and therefore one is compelled to have patience.
Regards,
R.N. Khola
From India, Delhi
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If you have filed the claim case before the Authority under the Payment of Gratuity Act, 1972, then keeping in view the principle of natural justice, this authority must give an opportunity to the respondents before proceeding ex-parte. Courts take years to announce the final judgment, and therefore one is compelled to have patience.
Regards,
R.N. Khola
From India, Delhi
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Hi, Pl let me know if Gratuity is applicable for a workman employed through a contractor,even if it is not part of the commercial contract agreement.
From India, Bangalore
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From India, Bangalore
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Dear R.N.Khola, Is Training period of service is count under the gratuity ?? Like Training 1 year + service 4 year = 5 year (is eligible for gratuity ) regards, ashish
From United States, Santa Clara
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From United States, Santa Clara
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Re: Applicability of Payment of Gratuity Act to Contract Labor
Dear R.N. Khola,
Is the training period of service counted under the gratuity? For example, if the training period is 1 year and the actual service period is 4 years, would the total of 5 years be eligible for gratuity?
Regards,
Ashish
From United States, Santa Clara
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Dear R.N. Khola,
Is the training period of service counted under the gratuity? For example, if the training period is 1 year and the actual service period is 4 years, would the total of 5 years be eligible for gratuity?
Regards,
Ashish
From United States, Santa Clara
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Dear Ashish,
Before giving any opinion, we should go through the definition of the employee, which may be read as under:
Sec 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, semi-skilled, or unskilled, manual, supervisory, technical, or clerical work, whether the terms of such employment are express or implied, and whether or not such person is employed in a managerial or administrative capacity. However, it does not include any person who holds a post under the Central Government or a State Government and is governed by any other Act or by any rules providing for payment of gratuity.
After going through the definition, it is clear that an apprentice is not covered under this Act. However, it seems to me that we are not to consider the length of service of a trainee if they do not perform any skilled, semi-skilled, or unskilled, manual, supervisory, technical, or clerical work. If a person is appointed as a trainee under the IE (SO) Act, 1946/CSO and performs work of any of the aforementioned nature as part of the training scheme, then, in my opinion, this period of service should not be considered as service rendered for counting towards the service period for payment of gratuity.
Generally, after the completion of the trainee period, if a vacancy arises, the management may re-employ them after clearing the Full and Final (F&F) settlement and following the interview procedure. Following this procedure, there is no need to consider this service period. Therefore, if a person is appointed as a trainee and performs any of the mentioned works, then their service should be considered in the length of service for the gratuity consideration. Ultimately, it depends on the Authorities under the Act how they interpret the matter at hand, but the situation appears more favorable for a person who has worked as a trainee and is in continuity of service.
Opinion/comments submitted as requested.
Regards,
R.N.Khola
Labour Law Consultants (m)
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Ashish,
Is the training period of service counted under gratuity? For example, Training for 1 year + 4 years of service = 5 years (eligible for gratuity).
Regards,
Ashish
From India, Delhi
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Before giving any opinion, we should go through the definition of the employee, which may be read as under:
Sec 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, semi-skilled, or unskilled, manual, supervisory, technical, or clerical work, whether the terms of such employment are express or implied, and whether or not such person is employed in a managerial or administrative capacity. However, it does not include any person who holds a post under the Central Government or a State Government and is governed by any other Act or by any rules providing for payment of gratuity.
After going through the definition, it is clear that an apprentice is not covered under this Act. However, it seems to me that we are not to consider the length of service of a trainee if they do not perform any skilled, semi-skilled, or unskilled, manual, supervisory, technical, or clerical work. If a person is appointed as a trainee under the IE (SO) Act, 1946/CSO and performs work of any of the aforementioned nature as part of the training scheme, then, in my opinion, this period of service should not be considered as service rendered for counting towards the service period for payment of gratuity.
Generally, after the completion of the trainee period, if a vacancy arises, the management may re-employ them after clearing the Full and Final (F&F) settlement and following the interview procedure. Following this procedure, there is no need to consider this service period. Therefore, if a person is appointed as a trainee and performs any of the mentioned works, then their service should be considered in the length of service for the gratuity consideration. Ultimately, it depends on the Authorities under the Act how they interpret the matter at hand, but the situation appears more favorable for a person who has worked as a trainee and is in continuity of service.
Opinion/comments submitted as requested.
Regards,
R.N.Khola
Labour Law Consultants (m)
---
Ashish,
Is the training period of service counted under gratuity? For example, Training for 1 year + 4 years of service = 5 years (eligible for gratuity).
Regards,
Ashish
From India, Delhi
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Dear Sir,
I have a problem and would be glad if you could help me solve it. Is a part-time (permanent) employee covered under the definition of an employee u/s 2(e) of the Payment of Gratuity Act 1972? If possible, please cite a Supreme Court judgment on the matter.
Thanks and Regards,
From India, Mumbai
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I have a problem and would be glad if you could help me solve it. Is a part-time (permanent) employee covered under the definition of an employee u/s 2(e) of the Payment of Gratuity Act 1972? If possible, please cite a Supreme Court judgment on the matter.
Thanks and Regards,
From India, Mumbai
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Gratuity is payable by the employer, and in case the employer fails to do so, the principal employer has to pay the gratuity to the contract labor upon completion of the contract with the contractor.
Shrikant
From India, Delhi
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Shrikant
From India, Delhi
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Respected Sir,
My name is Sunil Khandelwal. i am residing at scheme no. 78, Indore. I worked with Reliance Telecom, Indore on contract in with Balaji Group in the period - Oct-2002 to March 2009.
I am eligible for gratuity but Balaji Group denied to pay gratuity. I file the case in 2010 in labor court but decision still pending. please give me your most help full suggestions .
From India, Indore
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My name is Sunil Khandelwal. i am residing at scheme no. 78, Indore. I worked with Reliance Telecom, Indore on contract in with Balaji Group in the period - Oct-2002 to March 2009.
I am eligible for gratuity but Balaji Group denied to pay gratuity. I file the case in 2010 in labor court but decision still pending. please give me your most help full suggestions .
From India, Indore
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Respected Sir,
My name is Sunil Khandelwal. I am residing at scheme no. 78, Indore. I worked with Reliance Telecom, Indore on contract with Balaji Group in the period from Oct-2002 to March 2009. I am eligible for gratuity, but Balaji Group denied to pay gratuity. I filed the case in 2010 in the labor court, but the decision is still pending. Please give me your most helpful suggestions.
From India, Indore
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My name is Sunil Khandelwal. I am residing at scheme no. 78, Indore. I worked with Reliance Telecom, Indore on contract with Balaji Group in the period from Oct-2002 to March 2009. I am eligible for gratuity, but Balaji Group denied to pay gratuity. I filed the case in 2010 in the labor court, but the decision is still pending. Please give me your most helpful suggestions.
From India, Indore
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I am not an HR expert, but my observation is that whether PE has to pay Gratuity to Contract Labourers depends on the Jurisdiction. If you are in Kerala or Bengal, you don't have to pay. If you are in TN, you have to pay. Everywhere else, you can pay or abstain from paying. As a lawyer, I think the correct position of the law is you don't have to pay.
The distinction between an employer and a principal employer has not been recognized anywhere in the Payment of Gratuity Act 1972. As per Sec 2 (f)(iii) of the Act, an employer means any person who has ultimate authority over the affairs of the establishment.
The Act does not define establishment, and this has created some confusion. In the case of Sailen Seth vs Deputy Labour Commissioner, Calcutta HC referred to the definition of establishment in Shops and Establishment Act and observed that the contractor, being registered under the S and E Act, has the responsibility to pay gratuity to its contract laborer. Similar decisions have been rendered by Kerala HC in a few cases. A contrary view has been taken by the TN HC, by observing that gratuity is wages as per Clause 2(d) of the Payment of Wages Act. Sec 2(d) opens with the words 'any sum which by reason of the termination of employment of the person employed is payable under any law.' But since neither the gratuity act nor any other law prescribes payment of gratuity to the contract laborer, it is not wages. More fundamentally, to constitute a payment under Sec 2(d) of the Payment of Wages Act, there needs to be termination of employment. There is no employer-employee relationship between the contract laborer and the principal employer. Even after the contract laborer stops rendering his service in the premises of the Principal Employer, he continues to be in the employment of the contractor, and the contractor has the discretion of deploying him elsewhere, so there is no termination of employment of a contract laborer even if he is not being deployed on the premises of the Principal Employer.
Hoping I have not confused the HR folks.
Arun Sasi
From India, Jamshedpur
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The distinction between an employer and a principal employer has not been recognized anywhere in the Payment of Gratuity Act 1972. As per Sec 2 (f)(iii) of the Act, an employer means any person who has ultimate authority over the affairs of the establishment.
The Act does not define establishment, and this has created some confusion. In the case of Sailen Seth vs Deputy Labour Commissioner, Calcutta HC referred to the definition of establishment in Shops and Establishment Act and observed that the contractor, being registered under the S and E Act, has the responsibility to pay gratuity to its contract laborer. Similar decisions have been rendered by Kerala HC in a few cases. A contrary view has been taken by the TN HC, by observing that gratuity is wages as per Clause 2(d) of the Payment of Wages Act. Sec 2(d) opens with the words 'any sum which by reason of the termination of employment of the person employed is payable under any law.' But since neither the gratuity act nor any other law prescribes payment of gratuity to the contract laborer, it is not wages. More fundamentally, to constitute a payment under Sec 2(d) of the Payment of Wages Act, there needs to be termination of employment. There is no employer-employee relationship between the contract laborer and the principal employer. Even after the contract laborer stops rendering his service in the premises of the Principal Employer, he continues to be in the employment of the contractor, and the contractor has the discretion of deploying him elsewhere, so there is no termination of employment of a contract laborer even if he is not being deployed on the premises of the Principal Employer.
Hoping I have not confused the HR folks.
Arun Sasi
From India, Jamshedpur
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Gratuity is payable even to a causal or temporary employee. Baban Vs The Estate Manager, Maharashtra State Farming corporation Ltd 2016, LLR 1140 (Bom. HC)
From India, Mumbai
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From India, Mumbai
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Composite claims forms have introduced by EPFO by notification on 20/02/2017. notification and forms are attached.
From India, Mumbai
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From India, Mumbai
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Yes, he will be eligible for gratuity if he has completed 5 years of continuous service.
Dear Madam/Sir,
I have a question related to the topic. A person over superannuation age (he is 60 years old) has joined our company. Is the company required to make provisions for gratuity in his case? Will he be entitled to gratuity if he serves for 5 years?
Thanks & Regards,
Major Ashish Acharjee
20th August 2010
From India, Pune
From India, Pune
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Dear Madam/Sir,
I have a question related to the topic. A person over superannuation age (he is 60 years old) has joined our company. Is the company required to make provisions for gratuity in his case? Will he be entitled to gratuity if he serves for 5 years?
Thanks & Regards,
Major Ashish Acharjee
20th August 2010
From India, Pune
From India, Pune
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Hello Dear professionals
Superintending Engineer, Mettur Thermal Power Station, Mettur vs. Appellate Authority, Joint Commissioner of Labour, Coimbatore & Anr, 2012 LLR 1160
The Madras High Court, in its recent judgment in the case of Superintending Engineer, Mettur Thermal Power Station, Mettur vs. Appellate Authority, Joint Commissioner of Labour, Comimbator & Anr, was called upon to decide on an issue dealing with the payment of gratuity to an employee of the Mettur Thermal Power Station, Mettur, (Power Station) whose services were terminated in 2003. The employee concerned worked at the Power Station between 1988 and 1999, as a contract employee. In 1999, the employee was directly hired by the Power Station and he continued to be so employed till 2003. Upon termination of his services, the employee claimed gratuity payments for a period of sixteen years, between 1988 and 2003. The Power Station claimed that its responsibility to pay gratuity would lie only in respect of the period during which the employee was employed directly by the Power Station (i.e., 1999 – 2003) and not for the period when he was a contract employee. The Madras High Court held that gratuity, being a termination payment required to be paid under a law, would constitute ‘wages’ under the CLRA and in accordance with section 21(4) of the CLRA, the Power Station (being the principal employer for the period between 1988 and 1999) would be responsible for the payment of gratuity to the contract employee.
Analysis
The Madras High Court relied on a decision rendered by it earlier in the case of Madras Fertilizers Limited vs. Controlling Authority under Payment of Gratuity Act and Others[1] and held that 'gratuity' payable under the Payment of Gratuity Act, 1972, were wages for the purposes of the CLRA. Consequently, by virtue of section 21 (4) of the CLRA, the onus of payment of gratuity would lie on the principal employer in the event of a contractor’s failure to pay.
While interpreting the definition of wages, the court held that, "the very language of Sub-clause (6) suggests that any gratuity which is not covered by Clause (d) is excluded from the term 'wages'. This would presuppose that Clause (d) covers some gratuity. Which that gratuity would be is the moot question to be answered. The answer is to be found in the plain language of Clause (d) which opens with the words 'any sum which by reason of the termination of employment of the person employed is payable under any law'". The Court held that 'gratuity' payable under the Payment of Gratuity Act, 1972 is a sum which by reason of the termination of employment of the person employed is payable under a law and accordingly would fall within clause (d) of the definition of ‘wages’ (quoted above).
Conclusion
This decision reiterates that a contract employee, working for a principal employer at the time of termination of his services by a contractor, may have a strong claim for the payment of gratuity directly from the principal employer in the event of a contractor’s failure. Therefore, it is advisable for all principal employers engaging contract labour through man power agencies and other contractors, to not only focus on ensuring contractor compliance towards routine payment of wages and benefits, but also towards terminal payments (such as gratuity) when a contract employee is exited during the period of his or her engagement
From India, Hyderabad
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Superintending Engineer, Mettur Thermal Power Station, Mettur vs. Appellate Authority, Joint Commissioner of Labour, Coimbatore & Anr, 2012 LLR 1160
The Madras High Court, in its recent judgment in the case of Superintending Engineer, Mettur Thermal Power Station, Mettur vs. Appellate Authority, Joint Commissioner of Labour, Comimbator & Anr, was called upon to decide on an issue dealing with the payment of gratuity to an employee of the Mettur Thermal Power Station, Mettur, (Power Station) whose services were terminated in 2003. The employee concerned worked at the Power Station between 1988 and 1999, as a contract employee. In 1999, the employee was directly hired by the Power Station and he continued to be so employed till 2003. Upon termination of his services, the employee claimed gratuity payments for a period of sixteen years, between 1988 and 2003. The Power Station claimed that its responsibility to pay gratuity would lie only in respect of the period during which the employee was employed directly by the Power Station (i.e., 1999 – 2003) and not for the period when he was a contract employee. The Madras High Court held that gratuity, being a termination payment required to be paid under a law, would constitute ‘wages’ under the CLRA and in accordance with section 21(4) of the CLRA, the Power Station (being the principal employer for the period between 1988 and 1999) would be responsible for the payment of gratuity to the contract employee.
Analysis
The Madras High Court relied on a decision rendered by it earlier in the case of Madras Fertilizers Limited vs. Controlling Authority under Payment of Gratuity Act and Others[1] and held that 'gratuity' payable under the Payment of Gratuity Act, 1972, were wages for the purposes of the CLRA. Consequently, by virtue of section 21 (4) of the CLRA, the onus of payment of gratuity would lie on the principal employer in the event of a contractor’s failure to pay.
While interpreting the definition of wages, the court held that, "the very language of Sub-clause (6) suggests that any gratuity which is not covered by Clause (d) is excluded from the term 'wages'. This would presuppose that Clause (d) covers some gratuity. Which that gratuity would be is the moot question to be answered. The answer is to be found in the plain language of Clause (d) which opens with the words 'any sum which by reason of the termination of employment of the person employed is payable under any law'". The Court held that 'gratuity' payable under the Payment of Gratuity Act, 1972 is a sum which by reason of the termination of employment of the person employed is payable under a law and accordingly would fall within clause (d) of the definition of ‘wages’ (quoted above).
Conclusion
This decision reiterates that a contract employee, working for a principal employer at the time of termination of his services by a contractor, may have a strong claim for the payment of gratuity directly from the principal employer in the event of a contractor’s failure. Therefore, it is advisable for all principal employers engaging contract labour through man power agencies and other contractors, to not only focus on ensuring contractor compliance towards routine payment of wages and benefits, but also towards terminal payments (such as gratuity) when a contract employee is exited during the period of his or her engagement
From India, Hyderabad
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The gratuity is payable to the employee either on completion of "Complete Five Years or 4 Yrs and Eight Months". Now, the question arises whether the contractual employee is eligible for gratuity or not. For 1-4 years, absolutely not. But, once the employee completes continuous 5 years within the organization, even if they are on contract, the employee shall become eligible for the gratuity.
From India, New Delhi
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From India, New Delhi
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An employee on a contractual basis is eligible for gratuity as per the PG Act 1972 subject to the other conditions.
From India, Mumbai
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From India, Mumbai
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Basically, companies with irresponsible and unqualified legal advisors or with a deliberate intent to hoodwink the law try to deploy various tactics and try to squeeze in terms or nomenclatures in the employment agreement. But the Payment of Gratuity Act encompasses any person working for an "employer" under its ambit, and the social security payable cannot be avoided by the employer by calling the person a contractor, intern, or apprentice if they have extracted full-time work from them. The only exception so far considered by the courts are the platform and gig workers who are truly independent and work as partners using their own resources for a company. So many lawyers, I am amazed, are giving irresponsible answers, clearly depicting their absolute incompetence in understanding the law.
From India
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From India
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