Rehired as a Consultant After Retirement: Is Gratuity Still on the Table?

Dear Sir,

If a person retired at the age of 58 from X organization, and was later reappointed as a consultant, completing 8 years of service, is he eligible for gratuity after retirement? What are the consequences, and is it legal?

What were the terms and conditions of employment? Were they similar to those of other employees in similar positions? If so, the employee would be entitled to gratuity. It is not illegal for an employer to pay gratuity even if the employee is not formally entitled to it. There may be tax implications for the employee in this situation.

Dear Jpp,

Semantic differences in certain terms always create confusion, and "consultant" is one such word nowadays as it is interchangeably used to refer to an on-roll designated employee in the hierarchy of an organization and as an external expert offering advice on demand. In the former, the employment relationship arises from the contract of service, and in the latter, the business relationship arises from the contract for service. Therefore, the accrual of employment benefits like gratuity depends on the nature of the contract between the organization and the individual.

If that 'consultant' has been reporting to the office at a certain time and remaining in the office for a certain time, say, 8 hours, like any other employee, if he used to apply for leaves whenever he wanted to take leave, and has been granted increments in the 'fees' every year, then it is very easy to establish a master-servant relationship. Once the master-servant relationship is established, gratuity will have to be paid if the post-retirement period comprises five years, with each year having 240 days of paid days.

As per Section 2(f) of the Payment of Gratuity Act, 1972, an employee means any person employed for wages in any kind of work in or in connection with the work of the establishment. Therefore, irrespective of the name tag the position carries, the entitlement for gratuity arises once the appointment crosses the five-year threshold limit.