Is a Long-term Contract Employee Eligible for Gratuity After Termination?

Dear All,

Please give an urgent reply.

In our organization, we have engaged a contract employee for the packing division. One employee has completed 6 years in our organization as a contract employee. Every year, we have renewed the contract. Now, he has been terminated by his contractor, and he is demanding gratuity.

My question is: is he eligible for gratuity or not?

Thanks & Regards,
pm

Was there any break in service of the employee? If yes, you are not supposed to shell out Gratuity. Has he worked with you as an "Employee" as per the Gratuity Act? Then you are supposed to pay out the same.

Dear All,

If the contract employee was in the employment of the contractor, then the payment of gratuity is to be made by the contractor if the contractor is covered under the Payment of Gratuity Act and the contract employee was in continuous employment as per Section 2A of the Act. The principal employer is not liable to make this payment.

Opinion/comments submitted as requested.

With Regards,
R.N.Khola

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Dear All,

In our organization, we engaged a contract employee for the packing division. One employee who has completed 6 years in our organization as a contract employee. Every year we have renewed the contract. Now, he has been terminated by their contractor, and he has demanded gratuity.

My question is: Is he eligible for gratuity or not?

Thanks & Regards,
pm

Dear sir,

If an employee has completed 5 years in the organization, which includes 1 year of training and a half-year probation period, then he/she is eligible for the gratuity amount.

I look forward to your important comments/advice.

Thank you.

Please read the Act. The Gratuity is payable only to such persons who are our employees. The contract laborers, being employees of the contractors, don't have an employer-employee relationship with us. In the event a contract laborer has served as an employee of your contractor for more than 5 years of continuous service, it is the contractor who is liable.

In the event the contractor does not pay him gratuity upon his separation from employment, the worker may approach the Controlling Authority under the Act and file a complaint against his employer (your contractor). In any event, liability will not come on the principal employer. The PE is responsible under section 21(4) of C L (R&A) Act, 1970 in the event of default by a contractor in payment of 'Wages' and not other components of benefits. Please refer to the definition of wages under the Payment of Wages Act, 1936, which excludes Gratuity.

Hope the above clarifies your doubts.

Regards,
Devbrat Jha
Associate Vice President (HR), DFPCL, Pune