Outsource-Gratuity

rakshitshubha

Dear All,
Suppose, there are few people(peon,accounts asst,technician) who are working under thrid party contract for more than 6yrs on the basis of contract between third party & us which is renewed on yearly basis and on the basis of renewal the third party issues fresh Appointment letter to these outsourced guys in every year accordingly.
Now, I would like to know whether these outsourced guys would fallen under Gratuity Act though we are obligating PF/ESIC/Bonus for them. If they come under Gratuity then who will be accountable for this and how.

Waiting for your valuable comments.

Thanx & Regards,

ramamurthyn

Dear Rakshitshubha
not withstanding a yearly renewed contract, they can claim grautity on the basis of continued EPF contributions alone. Primafacie the 3rd party will be responsible for payment of gratuity but if the 3rd party is proved a smokescreen, u may hv to pay.
regards

rakshitshubha

Dear Frnd,
As you are writting 'if the outsource provider doesn't make the provision, you(as a principal employer) may have to pay', that means Gratuity in this case, may not be mandatory. Is it! or this Gratuity is must, can't avoid at any reason. Please let me know.

Rgds,

hrpathak

Dear Friend
Simply Extension of Contract and extension of services/Fresh Appointment by Contractor on renewal is a papaer arrangement which can not decline benefit of Gratuity.
Who has to Pay- its a question you should reply. In your outsource agreement what is duty cast for this purpose?
May pl give detail to answer you specific.
with regards.
himanshu pathak

9227233315

sahayajosephraj

As far as the Gratuity and Bonus are concerned, the Contractor is liable to pay in respect of his employees. Unlike the other acts such EPF, ESI, WCA and CLRA, the PGA and PBA don't cast any obligation on the PE to pay the Gratuity and Bonus, in the event of contractor don't.

irudayam

[B][B]Re: outsourced employee- payment of Gratuity
The first qustio is whether gratuity is payable to emplyee engaged through contractors. The answer is in the affirmative accordiing to section 2(e) -'employee' of the Payment of Gratuity Act, 1972 subject to fulfilement of the conditios under Section 2A defining 'continuous service' read with Section 4 defining 'Conditions under which gratuity is payable'.

The second question would be bywhom it is payable?
According to section 2(f)(iii) of the Act, the person or the authority which, has the ultimate control over the affairs of the establshment , factory etc. , or the manager to whom the affairs are entrusted is responsible for payment of grautity. In otherwords, notwithstanding the format of agreement / contract / arrangement. the primary liability for payment of grauity lies with the Principal employer or the ultimate authority in comntrol of the establishment. Though the contractor has to pay gratuity if the worker had served under him for a period of not less than five years of continuous service, in case of non-compliance by the contractor for whatever reason grauity has not been paid to employee under conditions envisaged under section 4, the principal employer has necessarily pay gratuity to the emplyoee and consequently has got the right of recovery of the said amount from the contractor.
The law therefore makes it clear that payment of gratuity to employee under any circumstances takes precedence notwithstanding the nomenclature or format of the contract.
A.Irudayam
Advocate- High Court , Madras
+919940686632