Partner - Risk Management
Korgaonkar K A
Assistant Engineer, Indian Telephone Industries,
+1 Other

we are providing security services on contract to various establishments . We have provided services to one of of the P S U for more than 20 years and now the contract is discontinued For all practical purposes the said PSU have been paying all statuary liabilities like Minimum Salary ESI contributions and fixed working margins to us to maintain the unit. Some of employees have been working with the same organization since last 20 years. Now my query is for payment of Gratuity to these employees. Who shall pay gratuity Principal Employer or the contractor. As a contractor our understanding with the principal employer is all the statutary payments is to be paid by them but now the management is not willing to pay .
From India, Hyderabad
Dear friends,
I shall quote Mr. Madhu T.K vide as under:
"Therefore, if the contractor is not paying the gratuity to his employee(s) the principal employer cannot escape from his liability."

From India, Bangalore
Dear ,
By Law, contractor is liable to pay Gratuity to his employees but by virtue of Section 21(4) of CLRA Act, PE can make payment of gratuity to employees of contractor and recover the amount from him i.e. contractor.
Superintending Engineer v Appellate Authority, Joint Commissioner of Labour, Coimbatore 2012 LLR 1160 (Madras HC).
Madras Fertilizers v Controlling Authority 2003 LLR 244 (Madras HC).
In your case, you said, your PE had an understanding with you to pay gratuity to your employees engaged for him but now he is denying.
Under the circumstances, it is your liability to pay gratuity to your employees. And if you fail to pay it, PE has no option but to pay it and recover it from you.
If you have some proof of said understanding, you can sue him for non performance of the understanding but you can not do any thing under the Gratuity Law, in my view.

From India, Mumbai
First, there is nothing in contract labour law that says all statutory dues are liability of PE
There are specific things the PE is liable for :
- wages
- bonus
- PF
- esic
- overtime (due to factory's act not contract labour)
On account of definition of wages, overtime, leave wages, minimum wages gets covered.
Gratuity is not listed anywhere.
So as per law it's not their responsibility.
Further, as per law if they pay, then they can recover from you as a debt.
But if you had a specific clause in contract stating they will pay all statutory dues, then you have a legal right.

From India, Mumbai
The Madras High Court has held in a case whose facts are similar to those stated by Sissgulshan that the Principal Employer is liable to pay gratuity to the workmen of the contractor if the contractor does not pay and recover the same from the contractor. (Madras Fertilizer case).
From India, Madras
Dear Saswata ji,
The judgment- Superintending Engineer, Mettur Thermal Power Station, Mettur vs. Appellate Authority, Joint Commissioner of Labour, Coimbatore & Anr, 2012 LLR 1160 Madras Court held that gratuity payable under the Payment of Gratuity Act, 1972 falls within this definition of 'wages'.
Section 21 (4) of the Contract Labour (Regulation and Abolition) Act, 1970 (CLRA), mandates that a principal employer is responsible for the payment of ‘wages’ to a contract employee in the event of a contractor’s failure to pay within the stipulated time or in the event of a contractor making a short payment.
Therefore I said PE is liable to pay gratuity to contractors' employee if contractor fails to pay it.
V.Harikrishnan-Joint Commissioner of Labour(Retired): Government of Tamilnadu, Advocate and Labour Law Consultant has rightly said that the facts of above quoted judgment are similar to the queriest case.

From India, Mumbai
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