If a contract labour has worked with the Principal Employer say for consecutive 10 years. But his employer (contractor) has changed on 4 to 5 times. And his tenure under any contractor has not exceeded 5 years. Is he eligible for Gratuity at the time of separation?
From India
Loginmiraclelogistics & Management)
Labour Consultant
Retired Government Servant/advocate
Sr Dy General Manager

Statutory Compliance under Contract Labour Act
From India
Babu Alexander

The Principle Employer is liable for payment of Gratuity, if the contract workmen has documentary evidence to prove that he had worked with Principle Employer for 10 years, continuous service without and break.
If he raises any dispute before the Controlling Authority, and in a position to adduce evidence / documents to prover that he was in employment with the Principle Employer for more than 10 years of continuous service, even though contractor employer was different.

From India, Madras

Gratuity is decided and calculated as per The Payment of Gratuity Act 1972. As per this Act no principal Employer is liable to pay Gratuity in any case.
If contractor is changed and contract workers remain same, take precaution that previous employer (Contractor) has settled his Full & Final dues and No Dues Certificate is taken from workers. New Employer (Contractor) take him (Worker) on roll as new appointment i.e, separate workmen register, new employment card with new DOJ etc and if possible, a temporary / casual appointment letter may be issued by the contractor without mentioning the principal employer premises / plant.

From India, Ludhiana

Generally contracts are awarded for a maximum period of 3 years (with extension clause) and clients always prefer to award the contracts to new contractors after floating tenders.
The contract laborers working for contractors are on purely contractual basis or fixed time basis. Their employment is automatically seized when the contract is terminated / completed.
Once the contract is completed Principal Employers always ensures that all legal dues of contractor laborers are settled upto last working day including leave encashment and once confirmed from their HR/Audit dept. with relevant supporting documents, contractors final bill payment is processed. Hence there is no direct and indirect relationship of contract labour with Principal Employer thus not liable to pay any gratuity irrespective of no. of years services, he / she rendered in same premises.

From India, Thane
Suresh Rathi

Mr.Suresh is right.
The contract generally given for providing specified no of staff and not by specific names.
If the contractor has changed before expiry of qualifying period as given in Gratuity Act and full and final settlement has been done , then the point of Gratuity payment is not valid.
Col.Suresh Rathi

From India, Delhi

The moot question is - is it a good practice to adopt a skewed approach and seek ways and means to deny benefits as provided by public policy to employees who are otherwise eligible!
From India, Kochi

Respected Venu Ji,
We have shared the practical things happening in the industries, that to in Public Sector Units.
In fact there is no direct relationship between the Principal Employer and the contract labour. He / she never directly recruited by the PE.
Contract Laborers are appointed by contractors with certain terms and conditions and depending on their business requirements. Generally the nature of job is on contractual basis and fixed time period. Once the contract is completed / terminated, the contractors pays legal dues to their workmen and the workmen's employment seizes.
When the new contractor takes the contract, it is not binding on him to continue with the old employees working with the PE. The contractor may replace all the existing manpower and deploy his own workforce. And even if he hires some of the existing workmen, he will issue him fresh appointment letter as new joinee and in that case he need not pay him any gratuity if the contract tenure is less than 5 years.
Contractors also obtain Contract Labour License from the Licensing Authority (ALC) who is also aware that the contractor is going to continue some of the existing laborers, where he is not putting any condition and or clause that the existing workmen to be continued with their original joining date. In this situation where the contract labour can register his complain for his right?
In view of the above, it is requested to please suggest some remedy by which the workmen will be benefited.

From India, Thane

Kindly refer to the judgment of the Supreme Court in case of R K Panda vs Sttel Authority of India reported in 1995 (85) FJR 140. The issue related to absorption of contract workers by the Principal Employer. The below mentioned observation of the Supreme Court would throw light on the issue mentioned before.
" It is true that, with the passage of time and purely with a view to safeguard the interests of workers, many principal employers while renewing the contracts have been insisting that the contractor or the new contractor retains the old employees. In fact such a condition is incorporated in the contract itself. However, such a clause in the contract which is benevolently inserted in the contract to protect the continuance of the source of livelihood of the contract labour cannot by itself give rise to a right to regularisation in the employment of the principal employer"
This makes it clear that even in such facts, the contract labour doesnot become the employee of principal employer and therefore, how can they claim gratuity from the principal employer. Since the contractor is the employer, only he is liable to pay gratuity. It is also settled that gratuity cannot be claimed under the provisions of the Payment of Wages Act. Reference in this regard may be made to a judgment of the supreme Court in State of Punjab vs The Labour Court, Jullundur reported in 1979 (39) FLR 353 where it was held that Payment of Gratuity Act enacts a complete code containing detailed provisions covering all the essential features of scheme for payment of gratuity and that proceedings for payment of the same may be taken under that Act and not any other Act.
However, as a caution, the contractor must ensure that such workers donot complete 5 years continuous service.
I hope this would clarify the issue.
S. Sensharma
Industrial law Consultant, Meerut

From India, undefined

To avoid abuse of law. The Govt should make amendment to the Payment of Gratuity Act and make eligibility of completion of one year of continuous service for Gratuity.
From India, Pune

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