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Our company provides contractual labor to Fortune 500 companies. We offer fresh recruitments and also take the employees whom our client has shifted from their payroll. Now one of our client want us to give Gratuity to the resources who have completed 5 years with them, 2 years on their direct payroll and 3 years as contractual employee routed through our agency. The client will pay us the amount and we ned to pay it to the employee. My question is can we pay such amount as gratuity the resource
From India, New Delhi
Ideally you have to give gratuity to the employees who are completing 5 years in your organization. You are saying that they were on your payroll for 3 years, since their payroll is changed it means they are no more associated with your firm than you are not suppose to give them any kind of gratuity as they are not a part of our organization.
Let's hear it from experts what they have to say about it.

From India, Pune
Dear Pragati, Monica is right. Since the employees are on the payroll of the 3rd Party (Agency), your company is not liable to pay them Gratuity.
From India, Bombay
The employees are 3 yrs old on your company rolls, even though they worked for 2 yrs in the parent company they are not eligible for Gratuity because the continuity of service with your company is 3 yrs.
If the management is interested let them pay for 2 yrs or even for 5 yrs but your liability starts after completion of 5 yrs of service in your rolls.
Thanks and regards - kamesh

From India, Hyderabad
I dont think "Gratuity" will apply here. However, since the parent company wants to disburse the amount, this could be paid as a bonus.
Also, what is not clear is if the persons concerened are still in employment. Gratuity is applicable only on resignation / termination of service contract. If they are still employed by your company, no gratuity is applicable. Do note however, that even if you pay this one time bonus now, gratuity will kick in on completion of 4 years 240 days with YOUR company and that is a liability your company will have to bear in mind.

From India, Mumbai
Hell to all HR professional, After seeing all the replies above, I am agree with Mr. Executor.
From India, Surat
Dear Kamesh.........

1. From your query it is understood that your client-Company conitnued said employee with them to 5 years ( 2 years with them + 3 years with your company and still said employee is working with same Principal employer through your company). Actually & ethically,the Princial Employer's Company is absorbing Contract Labour/employees and regularised on Princial Employer's muster roll. ( having employement with principal employer is always better than having employement with contract labour, in all respect). Here, this case is clear-cut of UNFAIR LABOUR PRACTICE done by the Principal Employer.

2. Now ask to the Princial Employer to pay the Gratuity of 2 years to said "harrashed employee" and when he will complete 5 years of services in your organisation and then left your organisation then you pay the Gratuity as per the provision of said Act for actual service rendered in your organisation.

3. If said "Harrashed employee" wants to resigne immediately then only Princiapal Employer is held responsible to pay complete gratuity to said employee. (if he seek the relief under Law........Judiciary will not listen your 2+3 years arrangement and direct to principal employer to pay Gratuity for entire period i.e. 5 years to said employee).

From India, Pune
As per the Gratuity Act, following needs to be understood for claim and payment.
1) Tenure of unintrupted/Continuity(No break by virtue of employer change/service change , unless protected by agreement) service.--5yrs-
2) Master and Servent relationship.(Employer and Employee).
3) Any disciplinary action to stop payment of Gratuity.
In the above case if there is continuity of service ,Gratuity will be payable to the employee by the current employer on severance. The current employer can demand from the previous employer fo previous perod.
Mritunjay Nath Sahu.

From India, Vadodara
Dear Pragathi,

First and foremost, your question is not clear to me. As one of the respondents suggested gratuity is a terminal benefit in the event of any one type of termination of employment stipulated in the Payment of Gratuity Act,1972. You have mentioned that you also accomodate the persons on the pay roll of your clients as your contract employees when you are told to do so. Keeping off the ethics of such an act and the vulnerable sentiments of the poor employees, what has happened is transfer of service of the concerned employees from the PE to that of the contractor. So, in so far as you, the contractor is concerned, the concerned employees services start w.e.f the dates of their transfer and are still continued of course in the status of contract labour.Hence, where is the question of termination as of now? Even with the PE on their direct pay-rolls, it is only two years and no eligibility for gratuity arises.You have also stated that your client would pay you the amount ending in a doubting note whether you should pay such amount as gratuity to the resource. Any one with commen sense and a little bit of legal bent of mind can easily presume that the entire deal is shoddy and sham. I have seen many principal employers treating the contract labour as a good source of recruitment of regular labour. But yours is quite opposite and I am afraid that at some point of time, you both may land into trouble for it is certainly an act of unfair labour practice.

From India, Salem
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