Retrenchment And Gratuity Benefits For Employee Working At Client's Place

Hi Friends,

As always looking forward to guidance of esteemed members on a peculiar case:

Our (manpower providers / establishment) employee (executive level) was working at client's place for 03 years and contract for that employee was not extended by client owing to financial pressures. We informed the employee about the same and asked him to resign as no suitable position was available with us or other clients and informed over email about 1 month notice period. Employee asked us on reason for completion of employment with us and didn't resign, however served the notice period. We used to invoice the client on employee's CTC (which is inclusive of Salary+PF+Gratuity). Now following are the queries raised by the employee:

1. Employee is demanding retrenchment benefit as we had to end his employment. Is he eligible for the same and if yes what shall be the calculations.

2. He is demanding that since gratuity being a part of his CTC (offer letter) is being paid to us by the client. It should be returned to him in FnF though 05 years have not been completed. What should be the appropriate call in this matter.

Also, what shall be the legal standing of this argument as the employee wants to take this matter with our MD.

Kindly share your valuable inputs.

Thanks,

PLB

Dear PLB,

(1)The terminal benefit of retrenchment is available only to a person employed in the category of " workman " as defined under sec.2(s) of the Industrial Disputes Act,1947. However, designation or quantum of salary can not decide this factual position. You've mentioned that yours is a man-power provider on contract basis to your clients. If so, it is to be disclosed whether you have taken up any licence under the Contract Labour ( R&A ) Act,1970 and the post of executive at the client's site is included in the no. of contract labour actually supplied. Otherwise, his terminal benefits would strictly be as per the exit clauses of his contract of employment only.

(2) Gratuity under the Payment of Gratuity Act,1972 in this case will arise only after his rendering a continuous service of not less than five years both at the client's site as well as your establishment. However, in view of your receipt of gratuity amount already from the client on actuarial basis, you may consider paying off the same to the individual as it is going to cost you nothing more. So consider these points and put up a note to your M.D accordingly.

Sir, Thanks for your kind inputs. Need some better understanding on point 1 above: He qualifies as a workman under ID act, the offer letter specified maximum contract tenure of 02 years and subsequently an appointment letter was issued and he worked for 03 full years.
Is he eligible for retrenchment and what shall be the calculations.

Section 25F of the Industrial Disputes Act,1947 may please be referred to.
Since the initial contract tenure was over and his services were subsequently extended and the inevitable retrenchment happened in the middle of the extension period,
1) You have to serve a prior one-month's notice of retrenchment on the workman or one month's wages in lieu thereof and
2) Pay him, at the time of retrenchent, compensation @ 15 days average pay for every completed year of service.

most of all, what was terms of employment & in what capacity he worked at client end, mere designation will not decide whether he was working in supervisory category for the ID Act.
Gratuity would have been legally payable on completion of 5 yrs of service. Now gratuity component is included in CTC and the employee has agreed for it. Though it is not payable & as such employee can no legal right to it, it is left to the organisation whether to refund the said amount to employee or not.