Gratuity for Long-term Contract Workers: Should They Be Entitled and How to Calculate It?

Here is an interesting case regarding whether gratuity should be payable for a contract labor or not. A principal employer, X, renews only rate contracts for a contractor, B, for supplying labor. Contractor B has no written contract with any of his workers, and they have a monthly payment on a daily wage basis. Some workers of Contractor B attend their duties rarely (say, 10 days in a month) but have been working under 'B' for the last 8 years. Now, one of the workers wants to leave. Should he be entitled to gratuity? If yes, what should be the basis of calculation?

The names of 'X' and 'B' are kept confidential for the security of Contractor 'B', but they are facing a dilemma. Can anyone in West Bengal guide with a solution?

Thanks,
Krishnendu

Since the principal employer has no legal relationship with the worker of the contractor, the principal employer should not be in the picture at all. The contractor has hired employees and has been paying wages to his employees. If one of his employees leaves after 8 years of service, it is his responsibility to pay gratuity to that worker, and he is supposed to pay it. Now, whether the employee is eligible for gratuity or not is to be decided after verifying his service. In order to be eligible for gratuity, one has to be in continuous service for five years. Now, to constitute continuous service, one has to work for at least 240 days in each year. In this case, if the employee has the habit of working for 10 days in a month, then it is doubtful whether he would attain continuous service. Please verify whether he used to work for 240 days in each year.

Regards, Madhu.T.K