For example, we have employees on a 1-year contract. If someone leaves after completing 240 days but before the completion date of their contract, do I need to pay gratuity?
If I terminate someone for long absenteeism, etc., after 240 days but before the completion of the contract period, do I need to pay gratuity?
From India, Mokameh
Acknowledge(0)
Amend(0)
2If I terminate someone for long absenteeism, etc., after 240 days but before the completion of the contract period, do I need to pay gratuity?
From India, Mokameh
Acknowledge(0)Amend(0)
Dear Pritesh-Patel1,
First of all, the question of payment of gratuity arises only after an employee has completed 5 years of continuous service in the same establishment as per the provisions of the Payment of Gratuity Act. Therefore, you need not pay gratuity to an employee who is on a one-year contract, irrespective of whether he has completed one year of the contract or not.
Panchsen
P. Senthilkumar
IR Consultant
senprithvib6@gmail.com
9884009193
From India, Chennai
Acknowledge(0)Amend(0)
First of all, the question of payment of gratuity arises only after an employee has completed 5 years of continuous service in the same establishment as per the provisions of the Payment of Gratuity Act. Therefore, you need not pay gratuity to an employee who is on a one-year contract, irrespective of whether he has completed one year of the contract or not.
Panchsen
P. Senthilkumar
IR Consultant
senprithvib6@gmail.com
9884009193
From India, Chennai
Acknowledge(0)Amend(0)
Dear PSenthil,
I appreciate your prompt reply. This is regarding the 2018 amendment in the standing order and subsequent circular. I am attaching the link for clarification: [Business Standard Article](https://www.business-standard.com/article/economy-policy/fixed-term-contract-staff-to-get-gratuity-benefits-like-permanent-employees-118032200976_1.html#:~:text=In%20a%20first%2C%20wo rkers%20hired,time%20of%20leaving%20the%20job.& ;amp;text=Under%20the%20Gratuity%20Act%20of,when%2 0they%20leave%20the%20organisation).
Thank you.
From India, Mokameh
Acknowledge(0)Amend(0)
I appreciate your prompt reply. This is regarding the 2018 amendment in the standing order and subsequent circular. I am attaching the link for clarification: [Business Standard Article](https://www.business-standard.com/article/economy-policy/fixed-term-contract-staff-to-get-gratuity-benefits-like-permanent-employees-118032200976_1.html#:~:text=In%20a%20first%2C%20wo rkers%20hired,time%20of%20leaving%20the%20job.& ;amp;text=Under%20the%20Gratuity%20Act%20of,when%2 0they%20leave%20the%20organisation).
Thank you.
From India, Mokameh
Acknowledge(0)Amend(0)
Dear Prithesh,
As per the 2018 amendment, it clearly states that gratuity is only applicable after completion of 5 years of tenure of service in the same organization, regardless of whether the employment is permanent or under a contract. It is evident that the individual must complete a total of 4 years and 240 days of service within the same organization to become eligible for gratuity.
Individuals are not eligible for gratuity after completing 4.5 years. However, according to a ruling by the Madras High Court, individuals who have completed 240 days in their fifth year of service are entitled to gratuity. Furthermore, the legal heir of an employee is eligible for gratuity if the employee passes away during employment.
From India, Tiruchi
Acknowledge(0)Amend(0)
As per the 2018 amendment, it clearly states that gratuity is only applicable after completion of 5 years of tenure of service in the same organization, regardless of whether the employment is permanent or under a contract. It is evident that the individual must complete a total of 4 years and 240 days of service within the same organization to become eligible for gratuity.
Individuals are not eligible for gratuity after completing 4.5 years. However, according to a ruling by the Madras High Court, individuals who have completed 240 days in their fifth year of service are entitled to gratuity. Furthermore, the legal heir of an employee is eligible for gratuity if the employee passes away during employment.
From India, Tiruchi
Acknowledge(0)Amend(0)
Dear Hariharan,
I would like to request you to go through the link posted in my reply above. The 2018 amendment in the Standing Order states, and I quote verbatim: "He shall be eligible for all statutory benefits available to a permanent workman proportionately according to the period of service rendered by him even if his period of employment does not extend to the qualifying period of employment required in the statute."
This means that Fixed-Term Contract (FTC) employees are now eligible for gratuity even before completing 5 years of service. My query pertains to the treatment of gratuity if an FTC employee leaves before the contract completion date but has completed 240 days in that year.
Thank you.
From India, Mokameh
Acknowledge(0)Amend(0)
I would like to request you to go through the link posted in my reply above. The 2018 amendment in the Standing Order states, and I quote verbatim: "He shall be eligible for all statutory benefits available to a permanent workman proportionately according to the period of service rendered by him even if his period of employment does not extend to the qualifying period of employment required in the statute."
This means that Fixed-Term Contract (FTC) employees are now eligible for gratuity even before completing 5 years of service. My query pertains to the treatment of gratuity if an FTC employee leaves before the contract completion date but has completed 240 days in that year.
Thank you.
From India, Mokameh
Acknowledge(0)Amend(0)
Dear Pritesh-Patel,
Where is it written about gratuity in the said Notification? The said notification is amending Central Rules under the IE (SO) Act. The quote you gave verbatim is for statutory benefits available under the IE (SO) Act and not under the Payment of Gratuity Act.
The Payment of Gratuity Act is an independent piece of legislation which is not amended. According to it, one has to complete not less than 5 years of continuous service, except in the jurisdiction of HC at Chennai and Kerala, where POG is applicable on 4 years and 240 days in the fifth year.
From India, Mumbai
Acknowledge(0)Amend(0)
Where is it written about gratuity in the said Notification? The said notification is amending Central Rules under the IE (SO) Act. The quote you gave verbatim is for statutory benefits available under the IE (SO) Act and not under the Payment of Gratuity Act.
The Payment of Gratuity Act is an independent piece of legislation which is not amended. According to it, one has to complete not less than 5 years of continuous service, except in the jurisdiction of HC at Chennai and Kerala, where POG is applicable on 4 years and 240 days in the fifth year.
From India, Mumbai
Acknowledge(0)Amend(0)
Dear Bhartiya Akhil, Appreciate your view. Thanks for the clarity
From India, Mokameh
Acknowledge(0)Amend(0)
From India, Mokameh
Acknowledge(0)Amend(0)
Dear Bhartiya Akhil,
I think the confusion is there due to media coverage as attached below: [link] https://www.business-standard.com/ar...20organisation
Please review the information in the provided link for clarity.
Thank you.
From India, Mokameh
Acknowledge(0)Amend(0)
I think the confusion is there due to media coverage as attached below: [link] https://www.business-standard.com/ar...20organisation
Please review the information in the provided link for clarity.
Thank you.
From India, Mokameh
Acknowledge(0)Amend(0)
Dear friends,
After a dispassionate consideration of the points for and against the entitlement of employment benefits, particularly the payment of statutory gratuity in proportion to the actual length of a fixed-term contract of an employee in view of the amendment to the Industrial Employment (Standing Orders) Central Rules, I have a different perception based on the following points:
1) The amendment recognizes and extends yet another classification of workmen in all the industrial establishments coming under the purview of the IE(SO) Act, 1946.
2) The amendment serves the dual purpose of enabling flexible hire and fire of employees on jobs of ad hoc or special nature that lasts only for a predictable duration and conferring the same employment benefits on such contract employees on par with the regular employees of the establishment.
3) The arrangement of payment of employment benefits in proportion to the actual length of the contract service, notwithstanding any statutory minimum qualifying service, also tends to curb the tendency of keeping workmen on a contract basis indefinitely with occasional or intermittent artificial breaks.
4) The entire discussion revolves around the provisions of the minimum qualifying service u/s 4(1) of the Payment of Gratuity Act, 1972 vis-a-vis the IE(SO) CENTRAL Rules, 1946 as stand amended in 2018. In fact, according to the best of my knowledge and belief, this amended provision does not run counter to the completion of minimum qualifying service but by creating an agreement or contract of fixed-term employment, actually confers on such employees the right to receive better terms of gratuity as provided for u/s 4(5) of the PGA, 1972.
From India, Salem
Acknowledge(0)Amend(0)
After a dispassionate consideration of the points for and against the entitlement of employment benefits, particularly the payment of statutory gratuity in proportion to the actual length of a fixed-term contract of an employee in view of the amendment to the Industrial Employment (Standing Orders) Central Rules, I have a different perception based on the following points:
1) The amendment recognizes and extends yet another classification of workmen in all the industrial establishments coming under the purview of the IE(SO) Act, 1946.
2) The amendment serves the dual purpose of enabling flexible hire and fire of employees on jobs of ad hoc or special nature that lasts only for a predictable duration and conferring the same employment benefits on such contract employees on par with the regular employees of the establishment.
3) The arrangement of payment of employment benefits in proportion to the actual length of the contract service, notwithstanding any statutory minimum qualifying service, also tends to curb the tendency of keeping workmen on a contract basis indefinitely with occasional or intermittent artificial breaks.
4) The entire discussion revolves around the provisions of the minimum qualifying service u/s 4(1) of the Payment of Gratuity Act, 1972 vis-a-vis the IE(SO) CENTRAL Rules, 1946 as stand amended in 2018. In fact, according to the best of my knowledge and belief, this amended provision does not run counter to the completion of minimum qualifying service but by creating an agreement or contract of fixed-term employment, actually confers on such employees the right to receive better terms of gratuity as provided for u/s 4(5) of the PGA, 1972.
From India, Salem
Acknowledge(0)Amend(0)
I am in respectful agreement with the learned exposition of Umakanthan Sir above. The "Fixed Term Employment" was touted by the Government as an intervention made for securing better service conditions to fixed-term appointees which is seen as a solution to the unemployment crisis gripping the nation. So when it is stated that "he shall be eligible for all statutory benefits available to ....... in the statute," the golden rule of legal interpretation is: what does it imply in the ordinary and plain sense.
Undoubtedly, Gratuity is a statutory benefit and it is available to the permanent workmen, and there is a qualifying period of employment for it. So, going by the Golden Rule of Interpretation, the gratuity is covered. The object and purpose of the amendment was to make the Fixed Tenure Appointment a win-win formula for both the employer and employee. If the intention was otherwise, there would have been a mention to the contrary as the gratuity is the first thing that comes to mind regarding eligibility of a statutory benefit. So, looked at thus, it is clear that proportionate gratuity is payable.
From India, Mumbai
Acknowledge(0)Amend(0)
Undoubtedly, Gratuity is a statutory benefit and it is available to the permanent workmen, and there is a qualifying period of employment for it. So, going by the Golden Rule of Interpretation, the gratuity is covered. The object and purpose of the amendment was to make the Fixed Tenure Appointment a win-win formula for both the employer and employee. If the intention was otherwise, there would have been a mention to the contrary as the gratuity is the first thing that comes to mind regarding eligibility of a statutory benefit. So, looked at thus, it is clear that proportionate gratuity is payable.
From India, Mumbai
Acknowledge(0)Amend(0)
Dear Pritesh-Patel1,
This is in reference to your response to my answer regarding the eligibility for gratuity for FTC workers.
I have reviewed the 2018 amendment to the Standing Order, which states:
"He shall be eligible for all statutory benefits available to a permanent worker proportionately according to the period of service rendered by him even if his period of employment does not extend to the qualifying period of employment required in the statute."
Please note that the Payment of Gratuity Act is a self-contained code. There should be an amendment to the Act with a specific mention of exemption concerning the payment of gratuity to Fixed-term contract workers, regardless of their tenure of service or whether their service conforms to the 5-year qualifying period.
Without an amendment to the Payment of Gratuity Act aligning with the amended model standing orders mentioned above, the payment of gratuity to FTC workers who have served only 240 days is not applicable.
P. Senthilkumar
988409193
From India, Chennai
Acknowledge(0)Amend(0)
This is in reference to your response to my answer regarding the eligibility for gratuity for FTC workers.
I have reviewed the 2018 amendment to the Standing Order, which states:
"He shall be eligible for all statutory benefits available to a permanent worker proportionately according to the period of service rendered by him even if his period of employment does not extend to the qualifying period of employment required in the statute."
Please note that the Payment of Gratuity Act is a self-contained code. There should be an amendment to the Act with a specific mention of exemption concerning the payment of gratuity to Fixed-term contract workers, regardless of their tenure of service or whether their service conforms to the 5-year qualifying period.
Without an amendment to the Payment of Gratuity Act aligning with the amended model standing orders mentioned above, the payment of gratuity to FTC workers who have served only 240 days is not applicable.
P. Senthilkumar
988409193
From India, Chennai
Acknowledge(0)Amend(0)Join Our Community and get connected with the right people who can help. Our AI-powered platform provides real-time fact-checking, peer-reviewed insights, and a vast historical knowledge base to support your search.
Fixed Term Contract Employees to get Gratuity.docx
Fixed term employment extended.jpg
Notification No G.S.R. 1128(E) Contract Labour (Regulation and Abolition) Central Amendment .pdf