Can a Contract Worker Claim Gratuity After 6 Years with the Same Contractor Across Different Sites?

If a contract laborer works continuously for 3 years under ABC Contractor in one factory and for a further 3 years in another factory (different Principal Employer) under the same Contractor, then my question is: can he claim gratuity if he leaves the services of that contractor?

Awaiting your reply.

Regards,
Parag

Gratuity is payable upon completion of 5 years of service, except in the case of death. Therefore, the question of payment of gratuity for 3 years of continuous work does not arise.

It is the duty and liability of the employer who directly employs a person to pay the gratuity. The principal employer is not responsible for paying gratuity to a person who is employed by a contractor.

Dear Parag Ji,

Firstly, gratuity is payable upon completion of 5 years of service, except in the case of death. Therefore, the issue of payment of gratuity for 3 years of continuous work does not arise. It is the responsibility and obligation of the employer who directly employs a person to pay the gratuity. The principal employer is not liable to pay gratuity to a person employed by their contractor.

Keshav Sir, I believe there may have been a misunderstanding regarding my query. Allow me to clarify. The contract laborer worked a total of 6 years under one contractor but in two different establishments of principal employers. The contractor undertook a work contract for 3 years in one establishment, followed by another 3 years in a different establishment.

I trust this explanation clarifies the situation. Please advise me on a suitable solution.

Regards,
Parag

As per Section 1(3) of the POG Act, the POG Act is applicable to:

(a) Every factory, mine, oilfield, plantation, port, and railway company.

(b) Every shop or establishment within the meaning of any law currently in force in relation to shops and establishments in a State, where ten or more persons are employed, or were employed, on any day of the preceding twelve months.

(c) Such other establishments or class of establishments, in which ten or more employees are employed, or were employed, on any day of the preceding twelve months, as the Central Government may, by notification, specify in this regard.

The contractor or the contracting company is an establishment within the meaning of the law, without any doubt in my mind. Therefore, the contractor is liable to pay Gratuity to his employees who complete 5 years or more of continuous service with him. Such employees may work for a single PE or multiple, and it is solely the duty and liability of the contractor to provide Gratuity to his employees.

The contractor is liable to pay the gratuity amount to the contract workmen for their continuous service of 5 years, irrespective of whether they work in different principal employer establishments under the same contractor. The principal employer is also liable to pay the gratuity in the absence of the contractor paying the gratuity amount.

Regards,
D. Pannerselvam

Dear Mr. Pannerselvam, you must be referring to the recent judgment in the Mettur Thermal Power case of the Madras High Court, in which the court held that even the contractor's liability to pay gratuity can be imposed on the principal employer. Hence, even assuming that the service rendered by the employee is through a contractor, in the absence of the contractor paying gratuity for a particular period, the workman is eligible to receive gratuity from the principal employer. (LLR Mad. HC 374)

This judgment is not binding on other states.

Thanks for reminding me of this case.

Gratuity Eligibility for Deceased Employee

Dear HR colleagues, can you clarify my query? If an employee reported for duty yesterday and passed away today, what is the status of gratuity? Is he eligible for gratuity? If yes, how much and how is it calculated?

Regards,
S G ARAVIND
HRD

The nominee/legal heir is entitled to gratuity as per Section 4(c) of the POG Act. Now the question is, how much? According to the Act, gratuity is payable at 15 days' salary for every year completed. If 6 months and above are considered 1 year, otherwise ignore. In this case, as per the law, the gratuity calculation is NIL.

However, if the employer has a Group Gratuity Assurance (GGA) with any of the insurance companies and the employer is paying extra premium for the employees' lives, the legal heir is entitled to gratuity. This amount will be calculated for the remaining service of the deceased. The rate of salary would be taken as of the date of retirement based on considering the average inflation.