beg to differ from you Maneesha, Gratuity is for all irrespective of whether the employee is on contract basis or permanent basis.
Yes, in case the employee is on contract basis then it will be the responsibility of the contractor to provide the gratuity.
It will the moral responsibility of the PE to see that the contractor has paid the gratuity to the contractual employee.
I would like to attract your attention to one of our earlier thread discussing the same by SUHAS GARDE FROM NAGPUR
Dear All,
The payment of gratuity is linked with a concept, that if someone renders / offers his continuous service for more than 5 years to a particular establishment, then as a gesture of goodwill, he certainly deserves some appreciation. Thus to extend his gratitude the employer, makes some payment, as a token of appreciation for long association / service to the employee. To shape up or streamline this concept, our legislators enacted this into a peace of legislation, termed as '' The Payment of Gratuity Act, 1972''. This is a central act, and an independent peace of legislation. On the plain reading of Section 2(e), of the Act, i.e the definition of 'employee', the word 'contract employee' is not seen. Which means, the employees engaged by the contarctor, per se are not covered under the Act.
Similarly, the contract employees (which is a subject matter under contract labour Act)being the employee of contractor, the contractor is at his liberty to move them from one establishment to other. Thus, even if the contract employee remains in continuous employment of a contractor, he is rendering his uninterepted service to his employer, i.e the 'Contaractor'. In many of the contractual services like security, canteen, garden maint., house keeping, packing, the contractor keeps his employees moving at different locations. That shows the contract employee is offering his service to a particular contractor.
One of our friend has stated that, it is the liability of principal employer to pay gratuity, in case the contractor fails to make the payment. I feel he wanted to say in different context. As in Maharashtra, many of the industries like textile, residual and some Engg. industries are covered under the BIR, Act, where the definition of 'employee' covers even the contractor employee also. Further, some case laws under the CL(R & A) Act, shows that in case, the contractor fails to make payment to his employees statutory dues, its the liability of principal employer to pay. But, we haven't come across any such specific case law relating to gratuity payment being made by principal employer.
I am of the opinion, that contractors employee is not the liability of principal employer to pay as far as the issue relating to gratuity payment is concerned. This can be validated with a reasoning that any establishment engages the contract employees, for a specific nature of job, and for a specified period, with specific nos., by signing an agreement, and by complying with provisions under CL (R & A) Act. The establishment looks to it, that the services being given on contract are of not permenant nature & duration, rather sort of support services, which are like security, canteen, transport, packing, house keeping, garden maint.,loading,stacking etc... . Any industry off loads / outsources such support services to a contractor/vendor by following prescribed provisions under the CL (R & A) Act, which is again a seperate enactment. Thus, to talk about security service it can certainly be given on contract. The contractor keeps them on rotation by moving them at various locations, hence we can conclude for such services even if liability comes for gratuity, it is for the contractor to pay, and not for principal employer.
In Maharashtra, for regulating the employment of private security guards employed in factories and establishment, the security agency has to get it registered under ''The Maharashtra Private Security Guards (Regulation of employment & welfare) Act, 1981.'' This is a board, which declares min. wages for private security guards, and takes care of such issues... its like mathadi board.
Please do not engage contract workers on a continious uninerpted service of more than 5 + years.....then, you have no reason to call them contract employees.
Thanks and Regards,
Deepak Sabharwal