If employer hires an employee on contract basis and after end of his contract taking a month gap and enters in a new contract with same employee year after year, will that employee be eligible for gratuity after 5 years as there is a gap of 1 month in between his contract.

Dear Friend, Have you settled his previous employment Full and final and what was the PF status ?
From India, Mumbai
This will be counted as continuous service. One month in a year of 12 months will not make any difference because he should have worked for 240 days in eleven months. 240 days is the paid days which should include all weekly off days, holidays and leave days which are paid days. As such there is no meaning in putting the employee "in break".
We should not be appointing employees just to deny the benefits. Let us think positively and employ people for a long service. This will give them a feeling that they are being taken care by the employer. Gratuity is an amount paid for the long service rendered and as such you should have taken the entire benefits which could be taken from an employee. On the other hand, if he is not giving you any benefits, you should have sent him out immediately or not renewed his contract any more. Better think that he had benefited the company and do not think that he had only made cost to the company.

From India, Kannur
Dear Madhu Sir, 1. If the employee was absconding then how his service be continued? 2. If exit date is mentioned in PF then how his service be continued ?
From India, Mumbai
Where from this absconding issue has come? If the employee is not reporting the question of renewal will not happen.
When you can exit the employee in the PF, why can't you enter the same employee?
A service break in PF will no way affect his continuity of service for claiming gratuity. An employee who has put in 240 days of working in 12 months is said to be in continuous period. Between each renewal if there is one month gap, this would be regarded only as artificial interruption of service purposefully to deny the employees' right to get gratuity. If this employees is not a supervisory or managerial employee, he can file case against the employer treating this as an unfair practice coming under Industrial Disputes Act.
I have attached a case which is self explanatory and is applicable to the case in reference above,ie, employing persons for fixed term and renewing the same year after year.Please refer that also.

From India, Kannur

Attached Files
File Type: pdf Gratuity to FTC.PDF (227.7 KB, 646 views)


Dear All,
Employee doesn't come under pf esi as he is on contract giving consultancy services, but what m asking is after the end of contract, if he is not available for 1 month n join with us, with a fresh contract year on year with same 1 month break, will it be counted as gratuity ?

Mr Rithveek, in your first post you said,......hires an employee on contract basis....., that means you hire him for reward and make him work for a year, again ask him to go or he himself go (as you said he is not available for a month) for a month's vacation and then again come and makes an agreement with you for another one year and at the end of the year he again goes for a month long vacation to come back for signing another agreement. This is called fixed term contract employment.
Now you say that he is engaged through a consultancy(?) is he himself is the consultant? or simply he is sent by the consultant?
He can be excluded from ESI if his remuneration is more than Rs 21000. he can be excluded from PF if his salary is more than Rs 15000. If the salary is not more than 21000, even if he is sent from the consultancy he should be given ESI. Similarly, if his PF qualifying salary (the salary on which your company deduct PF of other employees) is less than Rs 15000, he should be given PF even if he is not under your rolls.
Now, if he has been sent by a consultant, he is a contract worker whose employer is the consultancy company. If that is the case there is no need for him to make a contract with you. It should be with Principal employer, ie, you and the consultancy.
Another possibility is independent contractor. An independent contractor is one who takes up work and does it and returns it. He will not be an employee of you and as such can be excluded from ESI,PF and ultimately gratuity also. But an independent contractor need not take a gap in between.Why should there be a gap? that is not required. Again an independent contractor will not be following the office timing, he will not follow your dress code, he will not be supervised by your people on matters other than quality of the end products delivered or services rendered. He will not follow your leave rules and you cannot take an disciplinary action against him other than termination of the contract.
One important point that I want to make is that before posting,make everything clear. When you post the issues very clearly and transparently, we can advise you properly. I have posted so many things here,mos of these are not related to you.But I was made to post such things because your question was improper. I am not fully convinced about your query or apprehensions because there are still some grey areas. I am sure that the employee is not an independent contractor but is coming to your office in time, following the leave rules, following the instructions of your persons and he is subjected to disciplinary action as per your company polices.

From India, Kannur
Dear Madhu,
Thnx, for ur in depth explanation, but he himself choose to go for a month for some reasons, n that doesnt fullfill the continuous service, point neither it was mentioned in his contract that he will be provide 1 month vacation, also in contract it was mentioned that contract will be deemed to be ended automatically once contract end date approaches.
Secondly there timings and leave structure is totally different from regular employees.
Now i actually want to ask this question coz due to some reasons, management has decided to device a pool of persons which should be given good salary but will be isolated from statutory & gratuity n other benefits, and for that everything is clearly mentioned in contract n clearly discussed with the person as well, but i need ur consent to implement it properly on ground.

Dear Ravi,
His full n final settlement was made n his salary is above 50k, so pf esi are not deducted , he is being given casual leave only n so no pl encashment as well, just salary in full n final settlement or any dies if remaining.

It is immaterial what is the type of contract that you enter into. If he is doing work similar to others, he is an employee only. If you see the case, Wockhardt Hospital Vs COT, Hyderabad, the Consultant Doctors were asked to pay income tax treating the remuneration the hospital pay them as professional Charges as Salary.
You can make a contract with any person who are not coming under the Labour Acts like Industrial Disputes Act, Minimum Wages Act, Payment of Wages Act,Bonus Act or Standing Order Act but you cannot keep them away from Payment of Gratuity Act. A person working for you should be an employee by whatever name he is called. Any contract which you make will be void abinitio if it deviates from the general law.
You can have two or three leave rules each applicable to each category of people provided it takes care of the minimum requirements under the relevant Act, ie, if it is a factory, Factories Act,if a commercial establishment, as per the state Shops and Commercial Establishments Act. You can have different timing for different category of employees. But that will not make any difference. There are yet other tests to prove master servant relationship. You cannot run the show only with Consultants. You cannot have independent contractors for doing work of perennial nature.
Now again coming to the applicability of Gratuity Act to your so called employee who takes one month gap and signs another contract, if it is established that he had worked for 240 days in each year,he should be paid gratuity even if you provide that he has given an undertaking that he will work for years and at the end of his service he will not demand a gratuity. This is because making such an agreement is totally illegal.

From India, Kannur

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