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My Company has nearly 500 employees. We are doing in house process for our client (within our premises) also doing some body shopping like team lease and mafoi to our client

One of our employees worked in our premises for X client(worked in our own premises) and later we moved him to Y client (which is body shopping). His overall experience is 6 years now and he recently submitted his paper. So his experience is 2 years in our own premises and 4 yrs in client place which is body shopping.

My query is in gratuity part. My management is ready to pay 2 yrs gratuity part only (where the guy is in our premises) and ask my client to reimburse for the 4 yrs gratuity (where he was in client premises on body shop method). And our billing to client so far on cost plus basis and which is excluded of gratuity. We donít have any agreement on particular clause on gratuity. Our monthly billing also not included this gratuity as a part. Our billing type is CTC(with out gratuity part)+10% margin+Service Tax.

My management is not ready to pay for 4 yrs and the same story is from client side and they argued that the guy have worked only for 4 years hence they will not pay for that. In this scenario if we paid only 2 yrs what are the consequences we have to face from the labour court or officer if this case is goes to labour tribunal.

Since he is a worked 4 years in Y client premises what is the liability and consequences for client Y company? Please share your valuable opinion. So that we will explain this to our management and client and get the payment done to that employee properly.

From India, Delhi

It depends on which roll he has served. Its not about the place of work but rolls. If he has worked under your rolls, yes he is eligible for gratuity and you have to pay him. but if he has been in two rolls, two years in your company and four years in the next company, then you need not to pay even for two years.
Secondly, there wont any prob till the employee raises it as an issue. But why to take which will spoil your reputation, better consult with your management and sort it out amicably.


Dear Madhan
As a matter of fact, if you maintained the documents properly, then you need not worry about anything. Mr. A worked in a company for 4 years for which he is not eligible for any Gratuity. Then he joined in your company and served in different rolls for 2 years. For this also he is not eligible for any Gratuity. As both are in different rolls and not in the same rolls, (eventhough the working premises are same), he is not eligible for any Gratuity.
If a person serves on the other's rolls and not in company rolls, means, he is an outsourced staff and he is the permanent staff of the outsourcing agency and he cannot claim anything from the company. If the person left the Outsourcing agency and joined the company then he got detached from the Outsourcing agency and getting in the rolls of the company.
Please explain the same to the employee and clear his eligibility immediately as per law.

From India, Kumbakonam
Gurgaon HR

Dear Mr. Madhan,
Condition 1. If the employee was on your roll for 6 years (4 +2) then you need to pay gratuity even if the client is not ready to pay because the employee was on your roll for 6 years.
Condition 2. If the employee is on your roll for 2 years and then was on roll of client for 4 years (documentary proofs must be available) then neither you nor your client need to worry for payment of any gratuity because employee had not served for 5 years as per gratuity act.
Simple and clear.
Chill HR

From India, Gurgaon

Dear Madhan Ji,

As the learned seniors has already explained above, here the first important thing which is necessary to know that during these 6 years tenure, was he in a particular company..?? or in different ones..??

As you have mentioned in your query, it seems that the employee was on your rolls for complete 6 years and during this, he worked for 2 diff. client of yours'. In which, 2 years at your premises for 1st Client and 4 years at another client's premises. Plz. correct, if I am getting it wrong.

If this is the actual position, then no doubt that the employee is eligible for gratuity and it is the responsibility of your organization to pay him the gratuity. If you will not pay him, he can lodge complaint to Labour Department for this and then you will have to pay in front of labour official and might be with Interest. So, it is better to pay him now. It can be claimed from the clients vide raising invoice for the same. And being on a safe side, I'll suggest you to raise the invoice without delaying, because it will help you if your client don't pay you for that and the employee files complaint.

You can explain the client that although the deployed worker worked there only for 4 years but he is working under your organization since last 6 years and due to it, he is eligible for Gratuity. And as he served their location for 4 years, they will have to pay for 4 years, being the principal employer. Although the rate for claiming the gratuity from that client will be as per the last basic+da paid to such employee during the deployment period or it can be mutually decided.

And for a safer side, your organization should include the proportionate Gratuity Amount in the monthly costing for the client. It will make your work easy and will save your organization from such situation.

Hope this will help you.

From India, Delhi

Dear Madhan
Instead of telling simple Thanks for all the members participated in this thread, please explain the complete scenario of the case (because many members were not understood the query fully) and answer the question asked by Mr. Arya.
Have you come to one conclusion? If so, please give information regarding the decision taken on the issue, so that other members can take a lead from your decision.

From India, Kumbakonam

Many learned followers have given a real valid point. If the 'X' employee was on the roll of same employer, then he is eligible for gratuity at the rate prescribed in the PG Act at the time of separation from service. BUT if he has remained on the roll of different companies for 2 years and 4 years separately, he is not eligible for gratuity as on date till he completes a minimum 5 years of continuous service in one Company before separation on grounds other than moral turpitude.
These facts may be made known to the employee. If 1st is the case, pay him gratuity as per entitlement, if 2nd is the case, don't worry about any legal consequences. There will be none.
AK Jain

From India, Jabalpur
From India,
korgaonkar k a

Dear Madhan ji,
You are the employer to the said employee you refereed in this post through-out his entire tenure of employment of 6 years. You can not deny the employer-employee relationship on the basis of the person is not working in your premises or on the basis of pay roll out sourcing by you to someone else. You are sole liable to pay gratuity to him for 6 years. You are liable to pay gratuity to him, whether you get the reimbursement from your client or not. HR professionals should not have any doubt on it.

From India, Mumbai
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