Can Joint Venture Employees Claim Gratuity Under Contract Projects? Seeking Clarity

Dear Sir,

We are working in a joint venture company under a World Bank-funded project. The project is on a contract basis.

In such a project, in which more than thousands of workers are working, can we claim gratuity? Some of the employees have been working for the last five years, and the joint venture made agreements/appointment conditions in which gratuity payment is not mentioned. Is the Gratuity Payment Act applicable to these employees?

Thank you.

With Regards,

P. Hrishikesh Singh
HR Assistant

Is Gratuity payable to Joint Venture Employees or in Contract Project Packages?

Dear Sir,

We are working in a joint venture company under a World Bank-funded project. The project is contract-based.

In such a project, in which more than thousands of workers are working, can we claim Gratuity? Some of the employees have been working for the last five years, and the joint venture has established agreement/appointment conditions in which Gratuity payment is mentioned. Is the Gratuity Payment Act applicable to these employees?

Thanking you.

With Regards,

P. Hrishikesh Singh
HR Asst.

The project is road construction aided by the World Bank. The package is a three-year package.

Thank you.

Regards,
P. Hrishikesh Singh
HR Assistant

Dear Mr. P. Hrishikesh Singh,

In the case referred to by you, the employers are the partners in the joint venture. It makes no difference that the project is aided by the World Bank. The activity carried on by the organization is road construction.

Applicability of the Payment of Gratuity Act

The question of whether an organization engaged in construction activity would be covered by the provisions of the Payment of Gratuity Act was decided by the Honourable Supreme Court in State Of Punjab vs Labour Court Jullundur and others [1981 (1) LLJ 354]. The Honourable Supreme Court held that the Payment of Gratuity Act applies to an establishment in which any work relating to the construction, development, or maintenance of buildings, roads, or canals, or operations connected with navigation, irrigation, or the supply of water, or relating to the generation, transmission, and distribution of electricity, or any other form of power is being carried on. In view of this judgment, the Payment of Gratuity Act is applicable to your organization.

With regards,

Thank you very much. I hope further discussion will be ongoing with you. Is the payment of gratuity compulsorily notified to the government authorities if the employer is paying the gratuity as per rules? Can gratuity be paid directly by the employer? What is the payment procedure? Your kind suggestions in this respect will be highly appreciated.

Thanking you.

Regards,
P. Hrishikesh Singh
HR Assistant

Dear Mr. Hrishikesh Singh,

If your organization has branches in more than one state, then the Appropriate Government for your organization is the Central Government. In case your organization has branches in only one state, then the Appropriate Government is the Government of the state in which your organization is situated. If in your case, the Appropriate Government is the Central Government, you have to follow the rules framed by the Central Government under the Payment of Gratuity Act. If in your case, the Appropriate Government is the State Government, then you have to follow the rules framed by that State Government under the Payment of Gratuity Act. This is applicable for the Payment of Gratuity Act only.

Questions Raised

The first question is, "Is Payment of Gratuity to be compulsorily notified to the Govt. Authorities if the Employer is paying the Gratuity as per rules?"

The answer is that if an employee makes a claim for gratuity, the employer has to issue a reply to the employee in the prescribed form(s) prescribed under the Payment of Gratuity Rules. A copy of this notice has to be endorsed to the Controlling Authority notified under the Payment of Gratuity Act by the appropriate government. It is advisable to send this copy of the reply to the Controlling Authority by Registered Post with Acknowledgment Due.

The second question is, "Can Gratuity be paid directly by the Employer?"

Yes, gratuity can be paid directly by the employer to the employee or his legal heir or nominee. In case there is any dispute regarding the amount of gratuity payable, or as to the admissibility of any claim for gratuity, or about the person to whom it is payable, the employer should deposit the amount of gratuity admitted by him to be payable as gratuity with the Controlling Authority.

The third question is, "What is the payment procedure?"

The amount of gratuity can be paid to the worker through a crossed cheque.

With regards,

Dear Sir,

Thank you very much. We are paying the gratuity as part of the full and final settlement. Yes, we are maintaining Form-I, the Notice of Gratuity Payment to the Claimant, and we are keeping a received copy from the claimant. However, we are not issuing a cheque separately for gratuity payment. The full and final settlement bill amount, in which the gratuity head is also included, is paid by cheque or in cash.

With such practices, will there be any problems in the future regarding compliance with the Act? Your kind advice on the above will be highly appreciated.

Thanking you.

Yours faithfully,

P. Hrishikesh Singh
HR Asst.

There may not be any problem as long as you maintain the notice of payment of gratuity in the prescribed form and also get a receipt (which may be a consolidated receipt) from the employee for the full amount. However, the consolidated receipt should provide details of the breakdown of the various components of the full and final payment. In other words, the final receipt given by the worker should indicate the amount paid under different categories and must bear the original signature of the worker.

With regards,

Dear Sir, thank you very much for your assistance. The consolidated receipt includes all components for employees such as salary, leave encashment, bonus, and gratuity. The full and final settlement amount is being paid via an account payee cheque.

Your guidance indicates that gratuity payment can be included as part of the full and final bill. Your advice has undoubtedly improved the efficiency of our HR operations.

I believe that such discussions between us will lead to smoother office operations, enabling us to serve our employees in a transparent manner in the future.

Thank you once again for your support.

Yours faithfully,

Regards,
P. Hrishikesh Singh
HR Assistant

Clarifications on the Payment of Gratuity Act '72

Let me address some other points regarding the Payment of Gratuity Act '72:

• Suppose an employee joins an organization on a certain date and continues in service for one year. The same staff takes one month of entitled leave and does not report to work for six more months (considered as unpaid leave). The staff then reports to work on the first day of the seventh month and continues for another year. Subsequently, the employee takes another month of entitled leave in the following year and does not report to work for six more months (again, considered as unpaid leave). In such circumstances, how will the employer determine the service period of the said employee?

• Is AWOL considered as a part of the service period as per the context of the Gratuity Act '72?

• Does the Payment of Gratuity Act '72 only consider the Date of Joining (DOJ) and Date of Leaving (DOL)?

Your valuable advice on these matters will be highly appreciated.

Thank you.

Regards,
P. Hrishikesh Singh
HR Assistant