Dear Ayakkad,
The term " terminal benefit ", as the very name would suggest in employment parlance, is the consequencial monetary benefit due to an employee on his termination of employment after rendering a certain length of blemishless service under the same employer who is a legal entity as per its constitution. A contractor, therefore, would be a distinct legal entity such as a sole proprietor, partnership firm or an incorporated company. It then follows, in general, that whenever termination of employment takes place due to non renewal of the contract, the contractor is bound to pay gratuity only when the employees rendered the minimum qualifying service under him as per the provisions of the PG Act, 1972.