Gratuity For Security Agency Workers

Dear All,
We have deployed security agency for our company and they are charging gratuity on gross salary @4.81%
My question is why Principal employer has to pay gratuity, as a security agency employee he has to pay the gratuity after completion of 5 Years or 4 Year 240days
Request you to give your inputs
Regards
Satya

Gratuity is the primary responsibilty of the contractor/Security agency and not that of principal employer.However, the security agency must be factoring his cost in the wage bill. then this is a contingent liability which may or may not accrue and then how he can factor now.
B.Saikumar
HR & labour lawadvisor
Mumbai

Contract labour act does not make the principal employer liable for payment of gratuity of contract workers. However, e margins on security co tracts are slim. You are talking of 10% margin on salary. Our of that 4% goes off as tds service tax etc.
How is the contractor going to pay gratuity to any employee who worked with him for more than 5 years ? Or anyone who dies while in service. Once the contract is over, are you going to entertain his request for money to pay gratuity ?
So if you think he is not going to charge you gratuity amount, he will be working for free ? It's not a charity, you see

Gratuity has to be paid by the agency, but like other statutory payments like epf and esi the agency has to bill the Gratuity part also so as to pay his employees after the completion of the stipulated period.

Grautuity as per the act is applicable to employees hence contractor has to charge,reponsibility is of principal employer.However the payement terms of grautuity can be mutually agreed between the contractor and the principal employer as to how the payments of gratuity will be paid.But the grauty is payable to employee on eligibility as per the grautity act.
Bijay

During the recent times the Labour Authorities having been calling upon the Principal Employer also in case of disputes raised by contract labour regarding payment of Gratuity. Today the situation is such that if the Contractor fails to pay Gratuity then the Principal Employer is held liable !!