Gratuity Eligibility Confusion: Should Contract Workers Be Counted Too?

Employee Gratuity Eligibility Calculation

One company employs six individuals who have worked under company roles for the past 8 years. Additionally, four employees have been working through one agency on a contract basis for the last 8 years. Another four employees are working through another agency on a contract basis for the same duration. The total workforce is as follows:

- Permanent: 6 employees
- First Contractor through: 4 employees
- Second Contractor through: 4 employees
- Total: 14 workmen presently working

The question at hand is regarding the minimum gratuity for a workforce of 10 employees, which is mandatory. However, the employer has 6 employees on the company's payroll and 8 employees on a contract basis. The dilemma lies in calculating the employee count for gratuity eligibility. If only the employees on the company's payroll are considered, then only six employees are accounted for, making them ineligible. On the other hand, if contract employees are included, then they would be eligible.

Please advise on the correct method to calculate the employee count for gratuity eligibility in this scenario.

The contract labor has no legal relationship with the Principal Employer. Therefore, he cannot claim gratuity from the Principal Employer. However, since there exists an employee-employer relationship between him and the contractor, he can claim gratuity from the contractor. This relationship is specific because he gets his salary from the contractor.

Regards,
Madhu Sir

Gratuity Payment Responsibility

If the concerned contractor does not pay the gratuity, the principal employer has to pay it when the contract laborers become eligible. Once the contract employees complete their 240 days in continuous service, they become on-roll employees, so they are also eligible for the Payment of Gratuity.

Regards,
Babu