Gratuity period under third party

The Payment of Gratuity Act, 1972 does not differentiate between on roll & off roll employees (except govt approved apprentices). Please refer definition of employee:

["employee" means any person (other than an apprentice) who is employed for wages, whether the terms of such employment are express or implied, in any kind of work, manual or otherwise, in or in connection with the work of a factory, mine, oilfield, plantation, port, railway company, shop or other establishments to which this Act applies, but 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;.]

Employees on third party payrolls are actually the direct liability of Principal employer. Eg: If this same employee would have worked with the third party for 05 years & left, the actual liability of any gratuity payment would have been on your company (i.e the principal employer) The third-party/contractors are just intermediaries & they bill every such liabilities to their clients & the client is bound to pay all statutory payments arising out of employing such off-roll employees.

So now if you are taking him on-rolls, you will have to take into consideration his earlier years of service (till the time he was off-roll). Continuity of employment is what matters in Gratuity. And the moment he completes 05 years (off-roll plus on0roll), he will become eligible for gratuity payout.

regards

Adv Sunil Gaikwad

[Labour Laws | Payroll | PF | ESIC | PT | LWF | Audits | Advisory]

www.sunshineconsultants.co.in

Hi,
I am Jitendra,
I am working on payroll of india's famous Chennai based staffing company ******HR solution pvt ltd for (Deputed by) MNC Company as a creative desk from last 6 year without any break.
So in case eligible for any gratuity benefint or not................... PLEASE ASKE D ME AS PER NEW LABOUR LAW 2021

As per your query, you can get the benefit of gratuity. However, you can surely get the gratuity after completion of 5 times continuously services with same employer without any break, If you're on third party and as you said that agency has changed but employer is the same so. There's no need to fill any form, when you'll be leaving/ relinquishing the job also employers will have to pay it with final agreement. Actually, one of my friend was working on third party payroll ( agency C) since 4 times and after that Agency D took place but his current agency D has paid him gratuity (after competition of 5 times services and in final agreement) and agency D recovered from employer Z.

In India, the eligibility for gratuity is governed by the Payment of Gratuity Act, 1972. According to the Act, an employee must complete at least five years of continuous service with the employer to be eligible for gratuity. However, when an employee is initially employed by a third-party payroll and is later transferred to the company’s payroll, the period spent under the third-party payroll is generally not considered as part of the employee’s continuous service for the purpose of calculating gratuity.

However, if the employee has been continuously employed without a break (i.e., the transfer to the company's payroll was seamless), some companies may consider the period worked under a third-party payroll for gratuity calculation, but this is subject to the employer's policy and the terms of the transfer agreement.

Legal Provision:

Under the Payment of Gratuity Act, an employee is eligible for gratuity if they have completed at least five years of continuous service with the employer. The law does not specifically address the situation of third-party payroll employment, so the treatment of this period largely depends on company policies and agreements.

For more detailed information on gratuity eligibility, related laws, and how payroll transfers impact your end-of-service benefits, visit our blog at UAE Labour Law (note: while it primarily covers UAE labor law, we also provide general employment law resources that can be helpful).