Suresh P
Hr Professional
Hr Executive
Raj Kumar Hansdah
Shrm, Od, Hrd, Pms
Hr Generalist
+4 Others

Respected Members
I have a query on the gratuity payment made to employees on third party payrolls:
I will try to describe the situation in brief-
A company X has hired employees through two agencies- Agency A and Agency B. An employee working with Agency A is on its payroll, but the principle employer is company X. If the same employee moves to work for Agency B after working for 3 years with Agency A, will that person be entitled to receive Gratuity from Company X after 2 years of working with Agency B.
So the question is whether the terms of 3 and 2 years of the employee working with two separate agencies but under the same principle employer should be clubbed for payment of gratuity or not?
If yes, then please suggest some case law which will help validate the same.
The validation through a case law is essential for my query.
Thanking you

From United States, Brooklyn
Dear Snigdha, In the case detailed by you the outsourced employee is not eligible for any gratuity as he/she has not completed 5 years of service with any of the employers. Thnks, Chayan Roy
From India, Hyderabad
Thank you for the prompt response.
But the principle employer is Company X, so is it not possible that the terms can be clubbed to make it 5 years. Is there any case law with reference to the above problem?

From United States, Brooklyn
As per your query, if employees are on consultancy rolls, they was not eligible for Gratuity. If employee changed the consultancy means its just like change organisation. In this case Contractor is main employer and Principle employer is secondary. As per contact labor act, responsible of Salaries payment should be the contractor if contractor is unable to pay that time only principle is responsible.

From India, Hyderabad
If the principle employer is \'X\' for both the agents i.e. A & B, and the appointment order was issued from the X employer, though employee services utilized by various agents of principle employer . He will be treated that he is the employee of X. Therefore service rendered by the employee with all agents of X will be consolidated for the purpose of service benefits (including Gratuity)of employee.

From India, Bhubaneswar
The principal employer is liable for the payment of wages to his contract employee..See sec. 21 of CLRA Act.But not responsible for gratuity because it is not included in 'wages' u/s 2(vi) (6) of POW Act.
Varghese Mathew

From India, Thiruvananthapuram
As per your query, you can get the benefit of gratuity. If you are on third party and as you said that agency has changed but employer is the same so, you can definitely get the gratuity after completion of 5years continuos services with same employer without any break.
There is no need to fill any form, when you will be leaving/resigning the job then employers will have to pay it with final settlement.
Actually, one of my friend was working on third party payroll (agency C) since 4 years and after that Agency D took place but his current agency D has paid him gratuity (after competion of 5 years services and in final settlement) and agency D recovered from employer Z.

From India, Mumbai
Dear Pallavi
While congratulating your friend and appreciating the generosity of the company; I think this case can not be quoted as precedence or a rule for all companies.
Clubbing of services under multiple employer is not acceptable under the Payment of Gratuity Act 1972.
The individual can not claim Gratuity with any of the employers, as he has not completed 5 years with any of them; hence there is no claim for gratuity.
Warm regards.

From India, Delhi
Thank you all for your responses. However i have not been able to come to a consensus about the problem yet.
Also, I want to clarify that the employees hired by the principle employer through third party agencies are not contract employees, but permanent employees of the company.
Can someone please throw some light on the problem stated above?

From United States, Brooklyn
Dear Snigdhadalmiya

I think your query has been sufficiently answered.

I will reiterate it once again : X is a company and as principal employer, has certain number of contractors, say 23 from A to V. An employee works with several contractors for periods ranging from, say a few months to about 4 years. Let us say, in this way he has worked for more than 5 years, say 10 years. Now, can he claim Gratuity from the Principal Employer ?

Let us remember, that Gratuity is not wages; but a reward for long service; a terminal benefit; which an employer pays gratuitously to an employee at the end of his service.

Let us also accept the fact that PE is liable to pay any outstanding dues that a contractor does not pay to his employee.

Now the ultimate question is :

Can the employee DEMAND gratuity from any of his employers; i.e. contractors from A to V ???

He can not !!! Because he has not worked with any of them for five years, or the period required to become eligible for gratuity.

Now; if he CAN NOT CLAIM it against any of his employers; then how can he make the PE liable for it ???

PE is liable for only the rightful claim; that the contractor is unable to fulfill.

Now, which of the contractor can claim that he is eligible for gratuity ??

NONE !!!

Because, he has not worked for the required period WITH ANY OF THEM !!!

So, on what basis, the PE will entertain such a claim !!!

The above points have been made amply clear to you.

In spite of it, it is your choice if you still want to wait to read about opinion that YOU WANT TO READ.

The fact of the case will not change.

I wish the Principal Employer is the "best employer to work with" who gives gratuity to all such cases where employees working with several contractors can add-up their services and get gratuity from PE. The Law does not prohibit any extra payment or benefit to employees.

Warm regards.

Warm regards.

From India, Delhi

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