Gratuity Eligibility on completion of more than 5 years by Retainership Contract & then Regular Employment

Dear HR Professionals,
One of our employee joined on 17.05.13 to 31.09.16 (3 Years 4 months & 17 days) with a consolidated salary without any P.F deduction . Only deduction was TDS & Professional Tax. Subsequently he has been absorbed on Regular category on 01.10.16 with P.F deduction and may continue till 31.07.19 i.e. 2 Years, 9 months, 30 days by which his total service period reached to 6 years 2 months & 16 days. Now he asked for the gratuity. Whether he is eligible for Gratuity? Awaiting your valuable advice.
Thanks & Regards.

Hi Biju
The shift from contract to regular category should be considered as continuity of service and his request for gratuity should be considered.

The above employee joined at first on Retainership contract basis & then absorbed in Regular category

Since the spell on retainership contract is only a contract for service, it cannot be clubbed with the subsequent spell of contract of service i.e., regular appointment. Therefore, the individual cannot stake any claim for gratuity for the retainership period. If his regular service comes to an end by resignation or on account of any reason other than death or disability before the completion of 5 years of continuous service, he can not claim gratuity for that period also.

@Umakanthan53 - Sir, In the past I have worked for a India Private Ltd company - under two different entities (but one group) - one was on Retainership contract and other one on regular rolls. At the time of resignation from regular rolls have requested for continuity certificate and got gratuity clubbing both contract and regular service. I think employer can consider the request of employee in this case.

Dear Mr.Lakshminarayanan,
In fact, finding the mismatch between the title of the thread and its factual presentation, the original long response I made soon after your reply could not be uploaded and irrecoverably lost due to some computer glitch. Hence my subsequent brief reply. Coming to your comments, the gesture of your former employer is highly appreciable. In my work experience, I have come across many employers who had come forward willingly to provide for higher rate for calculation of gratuity in their service regulations. I had also seen advocates engaged on retainer basis in companies later becoming their regular employees for obvious reasons. But the career of a retainer is different from
that of a regular employee in terms of service conditions and benefits. However, as in your case, if the employer is willing, he can confer better employment benefits not with standing the terms of contrat by ignoring statutory restrictions, if any in appreciation of the individul's service. But, my answer is strictly based on the legal position of the services of a retainer. Otherwise, I have no hesitation in supporting your view point.

Sir, however if the company does not clearly term the contract as retainership, but later argues that the terms of agreement were for an "independent consultant"; however extracts work similar to other employees like:
1. Reporting to a supervisor having both full term and "contract" staff.
2. Shifts assigned equally and job divided equally.
3. Both eligible for weekly offs, appraisals, promotions, leaves.
4. Salary entirely based on attendance whether any work is done that day or whether 2x work is done on that day.
5. Complying with special requirements like on overwhelming inflow of work - cancellation of leaves and or weekly offs.
And after such a "consultant" has already completed 9 years, if the company refuses gratuity citing terms of contract which the "consultant" was not aware of, meaning later understands that though he didn't find any difference between the formerly appointed staff who were given regular appointment letters and himself throughout the tenure except for no deductions like PF and income tax but only TDS; isn't the company just circumventing the labour laws by blatant misclassification?
Section 14 of the act states that the act has an over-riding effect on other act and contracts. Therefore so long as definitions of "employee", "employer" and continuous service are met; should a labour court not take that into consideration?
Are there references, cases of this sort solved by the appellate or will it just be another never ending legal runaround?

The nature of the relationship between the employer and employee does not depend on the designation but on the work carried out and the role played by the employee concerned. From the facts narrated it shows regular employment, even otherwise as per PGA 1972, there is no exclusion if the employee is appointed as Consultant. The employee can claim gratuity and approach the local Controlling Authority under PGA (the concerned Labour Officer) the employer will have to pay gratuity with interest.

Dear Biju,
If you want to release you can otherwise you can say Nooooo (clearly refuse).
*You can not clubbed to make it 5 years
*As you know that Principal employer is liable for the payment of wages to related contractual employee But not responsible for Gratuity. Pls go through Sec. 21 of CLRA Act-1970. because it is not included in Wages of POW.

As per PG Act Gratuity to be paid to any employee who have 240 days continuous service irrespective of designation and terms of employment ( basically decided by the employer ). Many employers to avoid gratuity offer innovative designation - consultant, Adviser, Retainer etc. etc. but the nature of job is similar to regular employees. Like Lord Krishna has 108 names but the person is one, similarly for different designation the person is basically one regular employee.

I agree with KK!HR post. Real consultants or advisers are those who are not engaged in regular jobs but engaged in specialized jobs - not coming to duties every day etc. etc.. In those cases the situation will be different. Unfortunately, the organizations are engaging employees in regular jobs with color full designation only to avoid PF, ESIC ( if applicable ) , Gratuity, Bonus etc.


S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions
+91 98310 81531
[Login to view]
USD HR Solutions – To Strive towards excellence with effort and integrity