The Payment of Bonus Act,1965 does not differentiate between a contract worker and other workers. It casts responsibility on all employers , covered by the Act, to make payment of bonus to his employees subject to conditions mentioned in the Act.
The Principal Employer not being employer of contract workers, is not liable for payment of Bonus. The contractor who engages the contract labour, has to make payment of bonus,if applicable, as he is actually their employer.
Loading of bonus amount in the contractual payment made to the contractor by the Principal Employer is quite natural. But dont mention that component as bonus component.
In the event, contractor does not pay bonus to his workers, responsibility to pay unpaid amount of Bonus will not come on the Principal Employer. Such responsibilities of PE arise only in case of non payment of wages. As bonus( as per the Act ) is excluded from the definition of' Wages' as defined under the Payment of wages Act,1936, bonus will in no situation would be PEs responsibility. Such contract workers may have to make a complaint against their em[ployer, before the authority under the Act, for relief.
There is no legal requirement on the part of PE to ensure that contractor makes payment of bonus to his workers, however, morally, it is desirable to do so, as the contract workers are also working within our premises and any disruption in normal work by them might adversely affect our interest.
From India, Pune
38The Principal Employer not being employer of contract workers, is not liable for payment of Bonus. The contractor who engages the contract labour, has to make payment of bonus,if applicable, as he is actually their employer.
Loading of bonus amount in the contractual payment made to the contractor by the Principal Employer is quite natural. But dont mention that component as bonus component.
In the event, contractor does not pay bonus to his workers, responsibility to pay unpaid amount of Bonus will not come on the Principal Employer. Such responsibilities of PE arise only in case of non payment of wages. As bonus( as per the Act ) is excluded from the definition of' Wages' as defined under the Payment of wages Act,1936, bonus will in no situation would be PEs responsibility. Such contract workers may have to make a complaint against their em[ployer, before the authority under the Act, for relief.
There is no legal requirement on the part of PE to ensure that contractor makes payment of bonus to his workers, however, morally, it is desirable to do so, as the contract workers are also working within our premises and any disruption in normal work by them might adversely affect our interest.
From India, Pune
Viewers may note that Contract Labour are entitled for gratuity as per the decision of HIGH COURT OF JUDICATURE AT MADRAS DATED: 20.11.2006 The Honourable Mr.Justice P.D.DINAKARAN and The Honourable Mr.Justice P.P.S.JANARTHANA RAJA. in the case of The Management of Cruickshank & Company Ltd.vs The Appellate Authority under Payment of Gratuity Act, 1992and Regional Labour Commissioner (Central), Shastri Bhavan, Chennai.The Court held :
"The entitlement of contract labourers for gratuity cannot be dislodged or denied on account of tussle between the principal employer, who engaged the service of the contract labourers and the contractor, who employed the contract labourers;"
The Court went to further say:
....the gratuity claimed by the claimants herein being a welfare benefit created and payable by operation of law under the provisions of the Payment of Gratuity Act which are included under clause(d) of Section 2(vi) of the Payment of Wages Act within the meaning of wages payable to the contract labourers, it would be the basic responsibility of the petitioner *(ie the Principal Employer ) to make payment of gratuity to the claimants in full or in part as per Section 21(4) of the Contract Labour Act, of course, without prejudice to the right of the petitioner *(ie the Principal Employer ) to recover the same from the third respondent, contractor, even though the initial responsibility to make such payment of gratuity lies with the third respondent, contractor, as the welfare legislations such as
(i) Payment of Wages Act, 1936;
(ii) Contract Labour (Regulation and Abolition) Act, 1970; and
(iii) Payment of Gratuity Act, 1972,
are to be interpreted liberally and in widest possible construction in favour of the labourers, the claimants herein. Therefore, for deciding whether the wages payable to the claimants includes gratuity within the meaning of Contract Labour Act, 1970, whereunder the definition of wages is traceable to the definition of wages in the Payment of Wages Act, 1936 and the centrifugal issue whether the gratuity payable under the Payment of Gratuity Act is protected under Section 2(vi)(d) of the Payment of Wages Act, 1936, in spite of exclusion under sub-clause (6) of Section 2(vi) of the Payment of Wages Act, 1936, we are constrained, as a rule of interpretation, to refer the object and reasons of the legislative intention of all the three statutes, referred to above and the scope and ambit of the provisions contained thereunder and are satisfied that the gratuity being a benefit created and payable by operation of law under the provisions of the Payment of Gratuity Act, 1972, is protected within the definition of wages for having included under clause (d) of Section 2(vi) of the Payment of Wages Act, 1936. Therefore, the Court has to give full effect to the legal/statutory fiction and such fiction has to be carried to its logical conclusions, as any other view would only frustrate the legislative intention of all the enactments."....
*Added by us for explanation
By virtue of this Judgment employees of the Contractor deployed at the place of Principal Employer became entitled for gratuity as per the Payment of Gratuity Act were settled gratuity on their severance.In case the Contractor failed to settle it the Employees can make a claim on the Principal Employer who needs to settle it and becomes liable and thereafter recover it from the Contractor.
Applying the same analogy Bonus payment may also be reckoned in the same way.
rajanassociates
From India, Bangalore
"The entitlement of contract labourers for gratuity cannot be dislodged or denied on account of tussle between the principal employer, who engaged the service of the contract labourers and the contractor, who employed the contract labourers;"
The Court went to further say:
....the gratuity claimed by the claimants herein being a welfare benefit created and payable by operation of law under the provisions of the Payment of Gratuity Act which are included under clause(d) of Section 2(vi) of the Payment of Wages Act within the meaning of wages payable to the contract labourers, it would be the basic responsibility of the petitioner *(ie the Principal Employer ) to make payment of gratuity to the claimants in full or in part as per Section 21(4) of the Contract Labour Act, of course, without prejudice to the right of the petitioner *(ie the Principal Employer ) to recover the same from the third respondent, contractor, even though the initial responsibility to make such payment of gratuity lies with the third respondent, contractor, as the welfare legislations such as
(i) Payment of Wages Act, 1936;
(ii) Contract Labour (Regulation and Abolition) Act, 1970; and
(iii) Payment of Gratuity Act, 1972,
are to be interpreted liberally and in widest possible construction in favour of the labourers, the claimants herein. Therefore, for deciding whether the wages payable to the claimants includes gratuity within the meaning of Contract Labour Act, 1970, whereunder the definition of wages is traceable to the definition of wages in the Payment of Wages Act, 1936 and the centrifugal issue whether the gratuity payable under the Payment of Gratuity Act is protected under Section 2(vi)(d) of the Payment of Wages Act, 1936, in spite of exclusion under sub-clause (6) of Section 2(vi) of the Payment of Wages Act, 1936, we are constrained, as a rule of interpretation, to refer the object and reasons of the legislative intention of all the three statutes, referred to above and the scope and ambit of the provisions contained thereunder and are satisfied that the gratuity being a benefit created and payable by operation of law under the provisions of the Payment of Gratuity Act, 1972, is protected within the definition of wages for having included under clause (d) of Section 2(vi) of the Payment of Wages Act, 1936. Therefore, the Court has to give full effect to the legal/statutory fiction and such fiction has to be carried to its logical conclusions, as any other view would only frustrate the legislative intention of all the enactments."....
*Added by us for explanation
By virtue of this Judgment employees of the Contractor deployed at the place of Principal Employer became entitled for gratuity as per the Payment of Gratuity Act were settled gratuity on their severance.In case the Contractor failed to settle it the Employees can make a claim on the Principal Employer who needs to settle it and becomes liable and thereafter recover it from the Contractor.
Applying the same analogy Bonus payment may also be reckoned in the same way.
rajanassociates
From India, Bangalore
Hi Rajanassociate,
I am aware of above pronouncement of Chennai High Court. Subsequently, in the year 2004 Kerala High Court gave a judgement which categorically states that bonus(as Per Act) and gratuity cannot be claimed from the PE by a contract labour,as such claims by a contract worker is not legally tennable.(Comico Binnani Zinc Ltd vs. Pappachan.LLJ452 Ker.
In the year 2010, Calcutta High court, in the matter of Sailen Seth Vs. Dy. Labour Commissioner and others, 2011(1)SLR417, has pronounced similar judgement.
May like to peruse above judgements.
From India, Pune
I am aware of above pronouncement of Chennai High Court. Subsequently, in the year 2004 Kerala High Court gave a judgement which categorically states that bonus(as Per Act) and gratuity cannot be claimed from the PE by a contract labour,as such claims by a contract worker is not legally tennable.(Comico Binnani Zinc Ltd vs. Pappachan.LLJ452 Ker.
In the year 2010, Calcutta High court, in the matter of Sailen Seth Vs. Dy. Labour Commissioner and others, 2011(1)SLR417, has pronounced similar judgement.
May like to peruse above judgements.
From India, Pune
The issue seems to be as a principle employer do we have bonus obligation to contractor?
NO( except building operations). Pl.refer cominco benani zinc Vs papacchan LLR123(KER HC). Central Govt passed ordinance ,2007 so as to cover employees working on building operations through contractors. So in that case the principle employer would have to make provision of bonus. The calculation of bonus would be done by contractor. So the responsibility of principle employer is to monitor that just like wages , bonus is given.
From India, Mumbai
NO( except building operations). Pl.refer cominco benani zinc Vs papacchan LLR123(KER HC). Central Govt passed ordinance ,2007 so as to cover employees working on building operations through contractors. So in that case the principle employer would have to make provision of bonus. The calculation of bonus would be done by contractor. So the responsibility of principle employer is to monitor that just like wages , bonus is given.
From India, Mumbai
Dear All, Could you clarify whether the contractor labour is eligible for Bonus under payment of bonus act if yes- who has to pay and is it compulsory? Regards Sumitha.R
From India, Bangalore
From India, Bangalore
Dear Learned Friends,
If I remember correctly during 2007 an Ordinance was signed by those days President Mrs. Pratibha Patil withdrawing Section 32 of Payment of Bonus Act, 1965 wherein certain sectors were exempted from payment of bonus. It called as The Payment of Bonus (Amendment) Ordinance, 2007 ( http://www.prsindia.org/uploads/medi..._20To_20be.pdf ). A critical examination of Sectors and Industries for which exemption was withdrawn showed that they all are Labour intensive (like employed through contractors on building operations, Merchant Shipping, Dock Workers, inland water transport etc. ) and employing Contract Workmen. Also, the very Definition of “employee” covers "any person (other than an apprentice) employed on a salary or wage not exceeding three thousand and five hundred rupees per mensem in any industry to do any skilled or unskilled manual, supervisory, managerial, administrative, technical or clerical work for hire or reward, whether the terms of employment be express or implied" which too covers Contract Workers engaged through Contractors.
Therefore, there is "no escape" but to pay Bonus to Workmen. However, the procedure of calculation the "allocable surplus" from the business turnover is a tedious process and thus the calculation of Bonus payable to Workmen. This is a different topic altogether and a Financial Expert would be able to explain it better.
Regards,
From India, Pune
If I remember correctly during 2007 an Ordinance was signed by those days President Mrs. Pratibha Patil withdrawing Section 32 of Payment of Bonus Act, 1965 wherein certain sectors were exempted from payment of bonus. It called as The Payment of Bonus (Amendment) Ordinance, 2007 ( http://www.prsindia.org/uploads/medi..._20To_20be.pdf ). A critical examination of Sectors and Industries for which exemption was withdrawn showed that they all are Labour intensive (like employed through contractors on building operations, Merchant Shipping, Dock Workers, inland water transport etc. ) and employing Contract Workmen. Also, the very Definition of “employee” covers "any person (other than an apprentice) employed on a salary or wage not exceeding three thousand and five hundred rupees per mensem in any industry to do any skilled or unskilled manual, supervisory, managerial, administrative, technical or clerical work for hire or reward, whether the terms of employment be express or implied" which too covers Contract Workers engaged through Contractors.
Therefore, there is "no escape" but to pay Bonus to Workmen. However, the procedure of calculation the "allocable surplus" from the business turnover is a tedious process and thus the calculation of Bonus payable to Workmen. This is a different topic altogether and a Financial Expert would be able to explain it better.
Regards,
From India, Pune
Contractors are not paying Bonous to his employee in newly established unit whether this is in line of section 32 of bonous act or not/ Regards Ranjan
From India, New Delhi
From India, New Delhi
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