Entitlements Of Contract Labour - Docx Download

Dear Members ,
Just wish to seek some clarity on contract employees (hired from a vendor agency) and their entitlements :
Is it correct that they should be given benefits (leaves , gratuity , PF etc .) as per regular employees of Principal employer ?
Kindly advise .
Regards,
Girish

The contract workers engaged on similar work that of regular company roll workers are entitled to same salary, leave, Pf and gratuity at par with regular employees. However, there are some contradicting judgements which say that since the contract labour do not take the same responsibility that a company workers does, there can not be parity on salary. At the same time, with regard to payment of minimum wages and payment of statutory contributions, there can be no compromise and all contract labour should be paid the minimum wages and they should be paid PF, ESI and other social security contributions. As gratuity applies only to those who leave the contractor after being with him for at least 5 years, the issue will not have much relevance. However, if the same worker has been working under the principal employer for five years, the principal employer will have to ensure that the said employee is taken care of his gratuity also.
Madhu.T.K

Dear Madhu,
Thanks for your very prompt response Just wish to clariy , in case the nature of duties is different than the regular employees then which law/act will guide on various service conditions . Will it be driven by Master Service Agreement between Principal Employer and contractor Or any other establishment law ?
Regards,
Girish

Service conditions will be as per the rules of the Contractor's establishment because the employee employer relationship exists only between the contractor and the employees and in no way the service rules/ standing orders of the principal employer will apply to the workers of the contractor. At the same time, general rules which are embodied in various labour laws, like Contract Labour (Regulation and Abolition) Act, Payment of Wages Act, Minimum Wages Act, Provident Fund Act, ESI Act etc will apply to the workers of the contractor and it is one of the primary conditions of such kind of engagement that the principal employer is responsible for non compliance of the provisions of these Acts to the workers even if they are under the rolls of the contractor.

Master service agreement between contractor and the principal employer spells out the relationship between these two parties and anything written in it which is against the law of the land will not have any relevance also. Therefore, we cannot take it as it is.

Madhu.T.K

As per the opinion given to us the principal employer is not responsible for payments of gratuity. If any one can cite any contradictory judgement I would be grateful. Thanks and regards.

There are contradictory verdicts about the responsibility of principal employer to pay gratuity of workers engaged by the contractor. If the contractor keeps on changing the workers, then the Principal employer can not be made responsible but at the same time, if the same worker has been engaged in his plant through out for five years, it becomes his liability to ensure that he is paid gratuity if he leaves. As far as possible, he should not engage the same worker continuously for such a long period. This will also lead to a presumption that the arrangement itself is sham. Therefore, it is better to have different people under a contractor. After all, such engagement is made only in non perennial operations which need not necessarily be carried out by person possessing on the job experience.
Madhu.T.K

Mr Madhu, Thanks for the information. Job market being what it is, especially in security, once some body starts working in a factory which complies with labour laws, it becomes very difficult to look at the whole picture dispassionately and ensure that workmen are rotated.
Do you have any judgement which holds the PE responsible for payment of gratuity. Thanks and regards.

Please find the attachment. This verdict supports principal employer's responsibility to pay gratuity. At the same time, if the same contract labour has not worked for 5 years, the payment of gratuity is beyond his responsibility.
Madhu.T.K