Is My Father Eligible for Gratuity Despite Being Told He's on a Contract Basis?

My father is working at one of the publications, but they are receiving his salary slip as below:

Name & Address of Establishment
MANAGEMENT CONSULTANCY E SERVICE
Ahmedabad
&
Name & Address of Unit / Contractor
LOK PRAKASHAN LTD (ADVT.)

My father has been working since March 2014.

Eligibility for Gratuity

Looking at the above details, is he eligible for gratuity or not? All his colleagues and senior staff are telling him that it is on a contract basis, so he is not eligible. However, his PF and other deductions are being made on time, and he receives a salary slip regularly. I kindly request your guidance on this matter.

Thank you.

Dear Ankit,

To be eligible for gratuity under the Gratuity Act, an employee needs to have at least five full years of service with the current employer, except in the event that an employee passes away or is rendered disabled due to an accident or illness. In these cases, gratuity must be paid.

“Employee” means any person (other than an apprentice) employed on wages in any establishment, factory, mine, oilfield, plantation, port, railway company, or shop to do any skilled, semi-skilled, or unskilled manual, supervisory, technical, or clerical work, whether the terms of such employment are express or implied, and whether or not such person is employed in a managerial or administrative capacity. However, it does not include any such person who holds a post under the Central Government or a State Government and is governed by any other Act or by any rules providing for payment of gratuity.

As far as the provisions of the Payment of Gratuity Act, 1972 are concerned, I have no hesitation to say that the contract laborers are certainly covered under the Act since those contract workers work for the Principal Employer, though under or through a contractor. Such workers are not engaged to do the contractor's own work/job. What is material is 'for whom the work is done' and not 'under whom the contract laborers work'. If the service of contract laborers is availed by the establishment of the Principal Employer, the contract laborers shall at least be deemed to be the workers of the Principal Employer.

Thanks
S.Kumar

Dear Ankit,

Your father is eligible for gratuity.

Introduction of Fixed-term Employment

The concept of fixed-term employment was formally introduced in March 2018 by amending the Central Rules under the Industrial Employment (Standing Orders) Act, 1946. This amendment allowed all types of industries to engage fixed-term workmen.

Definitions and Nuances

The term "fixed-term employment" is defined only under the Code on Social Security and the Industrial Relations Code. There are two nuances that distinguish these definitions from one another. Under the Code on Social Security, the definition uses the term "employee" and does not contain clause (c) found in the Industrial Relations Code. The Industrial Relations Code, on the other hand, uses the term "worker" and includes the aforementioned clause, which states that a fixed-term worker shall be eligible for gratuity if he renders service under the contract for a period of one year.

Eligibility for Gratuity Under the Payment of Gratuity Act 1972

There is no exemption from the applicability of the Payment of Gratuity Act 1972 for the reason that it is a contract appointment. He has completed more than seven years of service, so prima facie, he is eligible. Please tell us the post and nature of duties assigned to your father.

Eligibility for Gratuity Payment

Whatever the nature of appointment, whether regular or fixed-term contract basis, or the manner of employment, such as outsourcing through a third party, once the employee completes the minimum qualifying service of 5 years in the same establishment to which the Payment of Gratuity Act, 1972 is applicable, the employer is bound to pay statutory gratuity to such employee upon the termination of their employment.

The Labour Codes referred to by Mr. Prabath are still awaiting their enforcement notification. Therefore, the existing PGA 1972 continues to be in effect. In the case of the poster's father being a contract laborer under the existing CLRA Act 1970, the Publishing House also holds liability towards statutory gratuity as the Principal Employer, as per the vicarious liability created under Section 21(4) of the CLRAA, 1970.