How gratuity will be implemented to contractors workmen in a new Company?
From India, Calcutta

The Payment of Gratuity Act 1973 does not cast liability on the principal employer for coverage of contract labour. Though there are a few High Court judgements putting the onus otherwise but that does not appear to be the case, in letter or in spirit. But at any rate, you may insist upon contractor to ensure coverage and allow for reimbursement of gratuity premum deposited with insurance agency with respect to the labour working a your premises.
From India, Mumbai
Srinath Sai Ram

Dear Bidush, you have stated that your Company is New? Consequently, the question of Payment of Gratuity arises only after Completion of 5 Years
Any Contract Employee who is Employed for 5 Years continuously in your establishment (Principal Employer) is eligible for Gratuity

From India, New Delhi
Dear Bidushsen, I think the implementation of gratuity for contractors or contract workers would depend on the specific laws and regulations of the country or region where the company operates. It's important to consult with local labor laws, employment regulations, and seek legal advice to understand the requirements and obligations regarding contractors' benefits in your specific jurisdiction (geometry dash lite). In some cases, companies may choose to provide additional benefits or incentives to contractors as part of their contract agreement. These benefits can be negotiated and specified within the contract terms, but they would typically differ from the gratuity provided to regular employees.
From United States, Montgomery

Hi Bidshusen,
Gratuity is typically a benefit provided to employees in recognition of their long and meritorious service to the company. However, it's important to note that the implementation of gratuity for contractors or contract workers may differ from that for regular employees, as contractors are often considered external entities rather than direct employees.

Here are some general considerations for implementing gratuity for contractors or workmen in a new company:

Legal and Regulatory Compliance:
Ensure compliance with local labor laws and regulations regarding gratuity payments for contractors or workmen.
Different jurisdictions may have specific rules regarding who is eligible for gratuity, the calculation method, and the conditions under which it is payable.

\Contractual Agreements:

Clearly outline the terms and conditions related to gratuity in the contractual agreements with contractors or workmen.
Specify the eligibility criteria, calculation method, and any other relevant details in the contract.
Calculation Method:
Determine the method for calculating gratuity for contractors, which may differ from the method used for regular employees.
The calculation may be based on the duration of the contract, the value of the contract, or other relevant factors.

Funding Mechanism:
Establish a funding mechanism to ensure that funds are set aside for gratuity payments to contractors.
This could involve setting up a separate fund or making periodic contributions to cover future gratuity liabilities.

Clearly communicate the gratuity policy to contractors or workmen, including the eligibility criteria, calculation method, and any other relevant information.
Ensure that contractors are aware of the existence and terms of the gratuity arrangement.


Maintain accurate records of contractor agreements, payment contributions, and other relevant documentation.
This documentation will be crucial for tracking gratuity obligations and ensuring compliance.
Consultation with Legal and Financial Advisors:
Seek advice from legal and financial advisors to ensure that the gratuity policy for contractors aligns with legal requirements and is financially sustainable for the company.

Review and Adjustment:
Periodically review the gratuity policy for contractors and make adjustments as necessary based on changes in regulations or business conditions.
It's essential to consult with legal and financial professionals to tailor the gratuity implementation to the specific circumstances and legal requirements of your location.
Additionally, keep in mind that the approach may vary based on the nature of the contractor relationship and Labour regulations.


From India, Bangalore

"Gratuity is typically a benefit provided to employees in recognition of their long and meritorious service to the company." Wrong. It is not a gift but a right of every employee who has rendered a service of five years.

Whether the principal employer has any obligation towards the contractor's workers is a question of law. In various verdicts it has been said that if the principal employer has knowledge that the same person has been deployed by the contractor exclusively for his service, then the gratuity payable shall become his (Principal employer) responsibility. On the other hand, if the contract is just for the number of persons and not for persons by name, then there is no liability for the principal employer.

It is true that payment of gratuity accrues only after five years. But in the case of death, this qualifying service will not apply. hence if you make a provision for gratuity, it should be from the first year of company formation itself. The Accounting standards also call for providing for gratuity funds based on actuarial valuation.

From India, Kannur

PE is always searching service provider / contractor at the cheapest rate. Contractor / service provider are accepting the order at low rate for competition to get the order. When the rate is not viable to run the service, the contractor started doing wrong things.

The ideal condition may be one service charge on monthly gross salary + employer portion of PF & ESI + reasonable service charge ( may vary between 5 to 7%). Any extra payment like Statutory Bonus , Leave Pay, Gratuity etc. to paid separately by the service provider / contractor reimbursed by the PE with at east 5% service charge as and when it will happen.

One thing is absolutely clear that the contractual employees are basically engage for PE's job and PE should be responsible for everything of contractual employee against one reasonable service charge.

If the contract is reasonable then chances of problem will be less.

S K Bandyopadhyay ( WB, Howrah)
CEO-USD HR Solutions
+91 98310 81531

From India, New Delhi
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