R.N.Khola
Labour Laws & Ir
Akm18
Senior Manager (legal & Administration)-cum-
Santu203
Labour Law/ir
Karamv
Hr & Admin
Essykkr
Statutory Complaince/labour & Employment
Ashutosh Srivastava
Sr. Manager Hr & Complaince
Rhari
Service
Priyanka226
Hr Manager
Rajendrasappa
Client Relations Manager
Siribkrao
Human Resource Management
Acharyatrushit
Human Resource
Seematk
Executive- Hr
Ashishacharjee
Hr Management, Administration And Security
+11 Others

I have the following views on the Payment of Gratuity Act 1972.

a) whether gratuity act is applicable to contract labour

b) whether it is applicable to fixed tenure contractual appointments

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

As regards tenure contractual appointments they are also not eligible for gratuity for the reason that the events on the occurrence of which gratuity is payable under the Act are

1.Resignation

2)Retirement

3)Death

4)Superannuation

5)Termination

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

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

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



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



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



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

Cyril
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
I agree with points of Mr. Hari. Gratuity shud not be payable to a contractual employee. We have appointed one labour contractor for providing housekeeping services for one yr and not paying gratuity. We are paying ESI, PF, Bonus and leave as statutory payments. Earlier we were not ready to pay bonus and leave but after discussion in management, it was decided to pay both as the responsibility to ensure these payments is of prncipal employer only.
Can anyone support the above with some cases / law.
Law is written but it is the interpretation which differs and creates confusion.
regards,
priyanka
Dear Mr.Hari,
My views are;
*Considering the Contractor as seperate entity, workers working with the contractors would be eligible for Gratiity from contarctor subject to cmpliance of other mendatory conditions like completion of continuous five yeras service ect.
*Since this is also social security legislation and therefore if contractor fails to pay the amount of gratuity the worker would raised the demand before principal employer
*It is then contractors responsibility to get the amount of gratuity from respective employers (as a part of commercial terms he has ensure) for the period/tenure such worker deployed
Kinldy repond if the views are clear and logical.
Regards,
ACCHR
hi hari
applicable and eligiable is lot of differnence in that, this grauity act will applicable to all employees wnen he is completed one year service but eligable for grauity five year service,
santhosh Nk
ABB
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
hi, very sumple dear,
if any employee( i.e. directly,probe.ad -hoc,dailywages, badli,casual, contractual and fix) completed 1 yr than applicable Gratuity Act and complited 5 yr service than compalsary eligible Gratuity Act. My dear in short u read defination of employee under tha said Act. this your proper solution.is it clear? ifany query under the labour laws u mail me
with regards,
Paresh M.Vyas
Advocate & Labour laws Consultant(M)
Dear Pareshbhai,Thanks a lots for quick reply but Dear Sir,what about following issues.Does Gratuity attract for contractual employment for fixed tenure of employment?what about in case of death?if death occurs then gratuity would payable up to 58 years/retirement or till the duration of fixed tenure?if we have supporting judgement regarding above i will be very thankful to the groupThanks
This is Bharti.. I've just join this forum.. i've few requests to make.. I worked as a teacher in kindergarten section of full fledge SSC school for 20 yrs.. 1988-2008. i resigned from my job with couple of other collegues. one completed about 7 yrs as a clerck in school and the other about 8 yrs as a KG teacher. friends of mine have posted them a request along with the copy of Gratuity act but theres no response from the management of the school. verbally we get the massage that act does not show the word school is liable to pay gratuity. it seem if u resign from the job u resign from incentives.. we dont find any way out of this but to forgo our rights.. can any one pl. help
Dear Paresh Bhai..
Could you pl. reply to my queiry.. Given to understand the Gratuity Act 1972.. person working in railways, shops , factories, mines etc etc are eligible for gratuity after completing min 5yrs of service. I worked in a school in kindergarten section over 20 years,I resigned from the post of teacher and my principal argues there is now word of school mentioned in an act so I'm not eligible for the same. Though my collegues who resigned got their gratuities, but to me she says it was a mistake made earlier so the management is not going to repeat the mistake again by releasing my gratuity. Also She argues on the point saying if u have resigned , you have resigned from your incentives..how far is the possibility of me getting my gratuity.. if you could help me I'll be obliged.. also if you could reply to me on I'll appreciate.. Kindly help me to get my dues.
Dear
It is hereby informed that teacher is not an employee according to the definition as laid down under section 2(e) of the Payment of Gratuity Act,1972 & therefore you are not entitled to any amount of gratuity under this Act.
Regards,
R.N.Khola


(Labour Law & Legal Consultants)
09810405361
Dear Mr. Khola,
Our school has already given gratuity to other collegues of mine. also i ask for gratuity as my school collects Rs 1000/- for every new admission towards teacher's gratuity fund.. how come I'm not entitled.. Pl. can you guide me.
Dear BG,
Then in my opinion you should approach the hon'ble civil court for getting proper remedy. First serve a legal notice on the management through a civil advocate.
Regards,
R.N.Khola


(Labour Law & Legal Consultants)
09810405361
Dear Mr. Cyril / Arun/ Paresh

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

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

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

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

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

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

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

Thank You,

Seema T.K.
Dear Mr. Cyril / Arun/ Paresh

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

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

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

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

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

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

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

Thank You,

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

(b) on his retirement or resignation, or

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

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

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

(2) For every completed year of service or part thereof in excess of six months, the employer shall pay gratuity to an employee at the rate of fifteen days' wages based on the rate of wages last drawn by the employee concerned : Provided that in the case of a piece-rated employee, daily wages shall be computed on the average of the total wages received by him for a period of three months immediately preceding the termination of his employment, and, for this purpose, the wages paid for any overtime work shall not be taken into account :
Dear Mr. Bobby
I'm Bharti. I've been hearing various suggestions on gratuity laws pl. do u know anyone who could suggest or guide me correctly if teachers are entitled for gratuity or no... Going through various sites ,sometime i understand that Law has been revised and teachers are entitled for gratuity.. But my principal refused to pay me saying I've resigned after 20 yrs of service and that shes not bound to pay me. i served her legal notice but still she refused to pay..what are the possibilities of me getting gratuity..
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
Dear Miss. Smita,
You have not mentioned the nature of your project work. Whether any construction work is going on ? Therefore, you are advised to go through section 1 of the P G Act, 1972 on applicability.
With Regards,
R.N.Khola

Sir,
The project is to set up a Plant which will produce Iron rods and the particular employee is in Civil Department. Though few of the project has been completed but the opertion is not yet started full fledge.
Please reply
Dear Smita,
After going through section 1(3) of the Payment of Gratuity Act, 1972 it does not seems to be covered under this Act.
Opinion/ comments submitted as requested.
With Regards,
R.N.Khola

Hi Gopalanis

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

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

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

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

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

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

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

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

Mohan Rao

Manager HR
Hi All,
I have a questions. I am working in a software firm. One of our employee worked with India office for 2 yrs, was sent on H1 B to US office for 2 yrs rejoined India office to work for 1.5 yrs. Is this employee eligible for gratuity?
Thank you
Sirisha
Dear Sirisha,
If the employer have worked with the same employer for five years or more continuously with out any break in service/ with out taking any full & final in between the service period as per section 2A of the P G Act, 1972 then he is eligible to have gratuity from the employer.
With Regards,
R.N.Khola




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

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

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

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

Regard
Sanjay
Gratuity For Contract Labour
Dear friends,
It is agreed that Gratuity is not payable for service less than five years. Since contract labour as the name suggests is supposed to be for just short periods, perhaps for this reason it was not included in the Payment of Gratuity Act. However, Section 25 F (b) of the Industrial Disputes Act, 1947 clearly mandates that the workman has been paid at the time of retrenchment compensation which shall be equivalent to fifteen days average pay for every completed year of continuous service or any part thereof in excess of six months; and
Thus every contract worker becomes entitled for this compensation , which in a way compensates the worker, may be not fully.
Shimlacharlie
I have a question for all law experts out there. The term teacher has not been included in the definition of employee under the Payment of gratuity Act. How will a recently retired teacher from private school prove that he/she is eligible for gratuity. What references should be given for that.
Dear Madam / Sir,
Hi, I have a question connected to the topic.
A person over superannuation age (he is 60 Yrs of age) has joined our company.
Is the company to make provision for gratuity in his case?
Will he be entitled for gratuity in case he serves for 5 yrs?
Thanks & Regards
Major.Ashish Acharjee
Dear Major Ashish,
In my opinion there is no bar as far as the age is concern in case of eligibility of gratuity. He will be entitled to receive gratuity if works continuously for five years with the same employer where this act is applicable.

Regards,
R.N.Khola




Dear Mr AKM, You are right but gratuity ceiling has been increased form 3.5 Lacs to 10 Lacs. Best regards
Dear Mr. R N Khola,
Thanks for your reply.
There is still one query, as per section 4A, every non government employer has to insure his gratuity libility by LIC or other such insurer.
Now, LIC does not insure the gratuity libility of people above 58 yrs of age (I dont know wether such practise by insurer is ethically and legally covered).
If insurer is legally covered for such act then may be gratuity coverage is not binding for people above 58 years of age!
Also In case such person dies after serving for some amount of time, will the gratuity payable be calculated on minimum 5 yrs & if the insurer like LIC does not cover such risk, then how can an employer be forced to undertake such risk?
Will be grateful for your views on this.
Thanks & Regards,
Major.Ashish Acharjee

Dear Ashish,

It is made clear that so far it is not necessary to have insurance for gratuity payment as the Govt. have not issued any notification for compulsory insurance under section 4A of this Act. As there is no bar relating to age in getting gratuity & therefore 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, and where any such nominees or heirs is a minor, the share of such minor, shall be deposited with the controlling authority who shall invest the same for the benefit of such minor in such bank or other financial institution, as may be prescribed, until such minor attains majority.

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



Dear Friends,
Under the ID Act an employee is entitled to receive fifteen days wages from his employer for each completed year of service. This is irrespective of the fact whether he is employed by the contractor or through the contractor. Under the law any one who is the real master of the worker is liable to discharge this liability.
However, if an employee irrespective of his status ie contract employee or otherwise serves under the employer or the master for five years or more, he is entitled to receive fifteen days wages for each completed year of service.
But method of calculation of fifteen days wages under the ID Act is just half month's wages and under the Payment of Gratuity Act it is monthly wages divided by twenty six and multiplied by fifteen.
Shimlacharlie
Dear All,
Thanks for your replies, it was very helpful.
Kindly let me know if a new employee more than the age of 58 joins the company, is provision of gratuity mandatory for him / her by the company?
Dear Mr Khola,
Thank you letting me know that teachers are cover under amended gratuity law...
I had resigned from my job in 2008 after 20 years of continue service as kindergarten teacher. I've filed a case on the institute and the principal and trustee.
But there is no reply from there side I just keep visiting the court and get another date from past 2 months..
How far you think would go on like this..are there any chances of getting justice..
Hi
Let us take the case of Service industry......, A company called ABC is a service provider and providing its services at XYZ i.e. clients place.Client (XYZ) as per agreement he will sign for some amount/person deployed.
Let us take we have deployed supervisor at clients place and client is paying for us the amount. He may be working at clients place which comes under contract, but he will be working on our rolls. It is our responsibility to show him other opportunity if we loose the existing contrat or send him with one month pay along with bonus and Gratuity. Even it depands on the salary break-up we give at the time of appointment.
Cheers
balu
Dear Member,
If you have filed the claim case before the Authority under the Payment of Gratuity Act, 1972 then keeping in view principle of natural justice this authority must be giving opportunity to the respondents before proceeding ex-parte. Courts take years to announce the final judgement & therefore one is compelled to have patience.
Regards,
R.N.Khola


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.
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
Re: Applicability of Payment of Gratuity Act to Contract Labor
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
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, but does not include any such 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 apprentice is not covered under this Act but it seems to me that we are not to consider the length of service of a trainee also if he does not do any skilled, semi-skilled, or unskilled, manual, supervisory, technical or clerical work. If a person is appointed as trainee under the I E (S O) Act, 1946 / CSO & do some work of any of the nature as detail out above as part of the training scheme then in my opinion this period of service should not be treated as service rendered for counting the service period for payment of gratuity. In general, management after the completion of trainee period if there happens to be a vacancy then they re-employ them after clearing the F&F & adopting the procedure for interview etc. After adopting this procedure we are not to apply our mind for consideration of this service period. In this way if a person is appointed as trainee & doing any of the work as mentioned above then his service should be considered in the length of service for consideration of period of service under this Act. Rest this all depend upon the Authorities under the Act that how they interpret the matter in question but even then the situation is more favouable for a person who has worked ad trainee & is in continuity of service
Opinion/ comments submitted as requested.

Regards,
R.N.Khola

Labour Law Consultants (m)


Sir i have problem would be glad if you could help me solve is part time( permant) employee covered under the defination of empolyee u/s 2(e) payment of gratuity Act 1972. If possible please cite a supreme court judgement in the matter .
Thanks n Regards

Gratuity is payable by his employer, and in case his employer fails to do so the principle employer has to pay the Gratuity to the Conntract Labour upon completion of the contract with the contractor.
Shrikant
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 .
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 .
I am not an HR expert but my observation is whether PE has to pay Gratuity to Contract Labourers depends on the Jurisdiction...if you are in kerala or Bengal you dont have to pay if you are in TN you have to pay...and every where else you can pay or abstain from paying ..... As a lawyer I think the correct position of law is you dont 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, 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 ..contractor being a registered under the S and E Act...it has the responsibility to pay gratuity to its contract labourer. Similar decisions had been rendered by Kerala HC in few decisions......Contrary view has been taken by the TN HC ....by observing, 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 or any other law prescribes payment of gratuity to the contract labourer... it is not wages ......and more fundementally 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 labourer and the principle employer even after the contract labourer stops redenring his service in the premises of the Principle 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 labourer even if he is not being deployed in the premises of the Principle Employer.

Hoping I have not confused the HR folks

Arun Sasi


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)
Composite claims forms have introduced by EPFO by notification on 20/02/2017. notification and forms are attached.

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