Understanding Gratuity for Short-Term and Long-Term Contracts: What Are the Rules?

We are a non-profit research organization registered under the Societies Act. We are a project-based organization and hire staff on short-term contracts (1 month to 1 year) and long-term contracts (renewable 3-year contracts). Staff who are on long-term contracts are provided retirement benefits like PF, gratuity, etc. In some cases, the period of short-term employees is extended from time to time. In some cases, staff members are converted from short-term contracts to long-term contracts.

Gratuity Entitlement for Short-term and Long-term Contracts

My understanding is that staff are entitled to gratuity irrespective of whether they are on short-term contracts or long-term contracts, whether it is written in the contract (offer letter) or not. However, I seek your expert advice, and my queries are as follows:

1. Will short-term staff be entitled to gratuity if they continuously work for five years? Although it is mentioned in the contract that staff will not receive any other benefits.

2. If some staff are converted from short-term contracts to long-term contracts, will the staff get gratuity from the date of the short-term contract or from the date of the long-term contract?

ESI Coverage for Societies

3. Are societies not covered under ESI?

1. A staff member will be entitled to gratuity if he/she has worked for a period of 4 years and 240 days, regardless of the terms of the contract. Any clause in a contract that is against public policy or labor welfare policy is void.

2. In the case of Netram Sahu Vs. State of Chhattisgarh & Anr., the Supreme Court held that for calculating the months of service under the Gratuity scheme, the continuous service of the staff must be taken into account. In this case, the staff's date of joining will have to be considered for the purpose of gratuity eligibility as well as its calculation.

3. A society that has 10 or more employees on any day during the previous year will be subject to the ESIC Act.

Please refer to the attached judgment.