Hello all, This is the situation,
Our company shifted a number of roles to a payroll company and has deployed these staff to one of our client sites. the offer letter to the staff were given by the payroll company. We have now changed the payroll company.
My questions are:
a) From a gratuity perspective, are the staff eligible for continuity of service?
b) For those who are not yet eligible for gratuity, will their service with the previous payroll company be part of the calculation of the 5 years for eligibility criteria? The client has not changed, their role in the client site has not changed, our company managers' continue to manage these staff on a day to day basis
c) Is the payroll company liable to pay gratuity, is our company liable to pay gratuity or is the client liable to pay gartuity.
6th June 2019 From India, Mumbai
The parent company is liable to pay gratuity. However all transfer to client site or other how your parent company doucmented it is the question. It is advisable to take a service continuity letter for the purpose of gratuity from parent company if they transferred you to different entity though it might be a sister concern. Also please check you were allotted different of, emp numbers.
6th June 2019 From India, Madras
yes..very critical funny query.
First let me know your wish ? willing to pay or to avoid ...
Its all you did to escape from payment..all efforts you have already done to avoid and escape...
*company not changed..client was not changed
*wisely transferred their names to another agency's pay roll...(another payroll company)
*successfully terminated them at once by shifting their names to another pay roll company
(acted like a contractor)by giving
separate appointment letters intelligently loosing all their previous service years..
*And Moreover made all those employees as daily labour (framing like they are all under a contractor working as a daily labour)
Finally you have done every effort not to take the risk of payment of Graduity..
NOTHING MORE TO SAY YOUR WILL WAS DONE BY YOUR HRs successfully to avoid gratuity payment by the parent company..
except only small weak thread connections ...like in some judgements parent company has also duty if they were still directly working in your company rolls though daily labour..
but you hav even wisely escaped.
6th June 2019 From India, Nellore
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7th June 2019 From India, Delhi
Dear friend,
I am not able to understand the actual motive or the practical necessity behind such a deployment of the services of your own workforce with bag and baggage to the same clients through another intermediary viz the pay roll company. Simply put this is an arrangement of sub-contracting to intelligently deny continuity of service to the displaced employees thereby apparently make them ineligible for gratuity and other benefits associated with longer tenure of employment under the same employer.
In the first place, most probably, you would not have obtained the consent of the concerned employees or employing some intimidating tactics like creating the situation of take it or leave it. Any way, it is an unfair labor practice.
8th June 2019 From India, Salem
as per my understanding, since you are parent organization, switching payroll of the associates should not ruin the service continuity benefit of the associates.
they should get the gratuity benefit as long as you are not giving them another appointment letter through that another payroll agency.
12th June 2019 From India, Pune
Dear Sir
Prima Facie It is an unfair labour practice and invite the unrest of employee later it may be problem to attract right workforce however it is not good practices for deployment of employee after certain period to another agency/ Contractor for sake of evading to Payment of Gratuity.
Sameer Shelke
Officer - HR & Admin
26th June 2019 From India
Sub: Gratuity payment
Please note that Contract Labour are entitled for gratuity as per the decision of HIGH COURT OF JUDICATURE AT MADRAS DATED: 20.11.2006 The Honourable Mr.Justice P.D.DINAKARAN and The Honourable Mr.Justice P.P.S.JANARTHANA RAJA. in the case of The Management of Cruickshank & Company Ltd.vs The Appellate Authority under Payment of Gratuity Act, 1992and Regional Labour Commissioner (Central), Shastri Bhavan, Chennai.The Court held :
"The entitlement of contract labourers for gratuity cannot be dislodged or denied on account of tussle between the principal employer, who engaged the service of the contract labourers and the contractor, who employed the contract labourers;"
The Court went to further say:
....the gratuity claimed by the claimants herein being a welfare benefit created and payable by operation of law under the provisions of the Payment of Gratuity Act which are included under clause(d) of Section 2(vi) of the Payment of Wages Act within the meaning of wages payable to the contract labourers, it would be the basic responsibility of the petitioner *(ie the Principal Employer ) to make payment of gratuity to the claimants in full or in part as per Section 21(4) of the Contract Labour Act, of course, without prejudice to the right of the petitioner *(ie the Principal Employer ) to recover the same from the third respondent, contractor, even though the initial responsibility to make such payment of gratuity lies with the third respondent, contractor, as the welfare legislations such as
(i) Payment of Wages Act, 1936;
(ii) Contract Labour (Regulation and Abolition) Act, 1970; and
(iii) Payment of Gratuity Act, 1972,
are to be interpreted liberally and in widest possible construction in favour of the labourers, the claimants herein. Therefore, for deciding whether the wages payable to the claimants includes gratuity within the meaning of Contract Labour Act, 1970, whereunder the definition of wages is traceable to the definition of wages in the Payment of Wages Act, 1936 and the centrifugal issue whether the gratuity payable under the Payment of Gratuity Act is protected under Section 2(vi)(d) of the Payment of Wages Act, 1936, in spite of exclusion under sub-clause (6) of Section 2(vi) of the Payment of Wages Act, 1936, we are constrained, as a rule of interpretation, to refer the object and reasons of the legislative intention of all the three statutes, referred to above and the scope and ambit of the provisions contained thereunder and are satisfied that the gratuity being a benefit created and payable by operation of law under the provisions of the Payment of Gratuity Act, 1972, is protected within the definition of wages for having included under clause (d) of Section 2(vi) of the Payment of Wages Act, 1936. Therefore, the Court has to give full effect to the legal/statutory fiction and such fiction has to be carried to its logical conclusions, as any other view would only frustrate the legislative intention of all the enactments."....
*Added by us for explanation
By virtue of this Judgment employees of the Contractor deployed at the place of Principal Employer who become entitled for gratuity as per the Payment of Gratuity Act are to be settled gratuity on their severance.In case the Contractor fails to settle it the Employees can make a claim on the Principal Employer who needs to settle it and becomes liable and thereafter recover it from the Contractor.
V.Sounder Rajan
Advocate -Labour & HR & Consumer Law Consultant -Chennai
Legal Consultant for Indian Staffing & Recruiting Industry
4th July 2019
Dear Sir/madam,
Greeting ...........
Can any employer give the employee the annual leave as monthly leave encashment. This will help employee get increased in hand salary. However, if he takes a leave his salary will be deducted.
Is this legally correct ? Is it ethically ok?
5th July 2019 From India, undefined
Dear Mr. Lal Ji Gaur
Ideally, the intention to provide leaves to an employee is to allow him to avail the leave. Leave Encashment is a concept where an employee does not avail the total quota of leaves and some leaves remain balance at the end of year or at the time of his separation. It is not legally correct to encash his proportionate leave every month and to deduct if he avails the leave.
Adv. Manish Gadre

13th July 2019 From India, Mumbai
Dear Lalji Gaur,
Regarding the proposed treatment of Annual Leave with Wages which is a statutory benefit of employment in an altogether different manner, you have raised your questions both from a legal perspective and an ethical perspective as well.
As I am given to understand, Annual Leave With Wages or Earned Leave or Privilege Leave, not withstanding the difference in their statutory nomenclatures is an accruable leave to be availed of in future by the employee based on the no of days actually s/he worked in the past. The leave so accrued can also be carried over to the future subject to certain ceiling, if not fully availed by the employee then and there. Moreover, encashment of such a leave, as every employment-specific law puts it, is only a statutory terminal benefit to the employee and an obligation to an employer. Such restrictions highlight not only the welfare motive of the Legislature but also the recognition of the necessity of ensuring physical and mental rejuvenation of the working masses.
Since your proposal introduces a system of instantaneous barter of hard earned leave for money, it is totally unethical.
When the law lays down that a thing should be done in a specified manner, you can not take recourse to some other manner so as to circumvent it even with the consent of the employee concerned. It is, therefore, totally illegal too.
13th July 2019 From India, Salem
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9th August 2019
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