Human Resource
Consultant & G.m.

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Dear Member's
Last month labour Inspector visited our plant and suggested that Under Payment of Gratuity force the contractors to take nomination forms for the workers.
He told that companies and Contractors are exploiting workers as cost cutting and reduction is always done in Manpower.
I told him that contract is for one year, and subsequently contract workers are removed from the company after one year and it dosent come under the liabiltiy of Principal employer to provide teh Gratuity. Instead of that we can generate a Gratuity Fund where the amount to be deposited for the gratuity to the workers and deduction of same amount to be made from the contractors it self and at the end of contract. the amount can be distributed to teh contract workers in the presence of Comapny represntative.

From India, Delhi
Dear Sehgal,
Similar subject was discussed in this forum some time back. You can go thro' this link and S.C. judgment quoted therein to know more about it.
The content of your third para required to be discussed little more by our friends in the context of the case decided by S.C. ibid vis a vis the provisions of the Gratuity Act..

From India, Bangalore
Dear Sehgall,

We have to note two important factors in this context -

1.So far as liability for payment of gratuity to employees under short term contract (which is presumably less than 4yrs + 240 days) is concerned, though Gratuity accrues to an employee after completion of every year whereas the actual requirement to disburse gratuity arises only after the "continuous service" of 5 yrs (i.e.4 yrs + 240 days). Supposing an employee is appointed for a fixed term of only 4 yrs. he doesn't earn any gratuity and the liability to pay doesn't arise as well. Of course, unless & until he is terminated or dies or retrenched (cessation of employment-for no reason of his fault)

2. The cessation of employment, after expiry of the fixed term of employment (say 4 yrs.) doesn't amount to "retrenchment" or "removal" (this term used is ambiguous as it may amount to some thing else as well.

With this back ground I am not sure-how far it's right or wrong the idea of creating a Gratuity fund and keep crediting the gratuity contribution till completion of the employment and disburse as "Gratuity" after 1, 2 ,3 or 4 yrs. when there is NO liability under Gratuity Act at all to pay. Of course, you can pay ex-gratia, bonus, parting gift, goodwill money or any thing else. In all fairness, legally, the (labour) contractor is right if he puts down your proposal, as a principal employer, if you are hiring the labour thro' the contractor. Let us study the matter little more by our experts.


From India, Bangalore
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