Whoever it is the Contractor also gots the profit, since he is taking profit, he too eligible to pay the Bonus to it's employees under Normal Practice. Here, the Principal Employer has to ensure whether the Bonus is paid to the Contract Employees or not. In the Wage Pattern itself, the Principal Employer has to make the break up which is inclusive of Bonus. The Bonus Act may talks about the Infancy Period ie, any organisation's age is below 5 years that has been exempted to pay Bonus, but in the same act it is clearly mentioned that, if the Organisation starts to getting Profit within 2 years, then it has to pay the Bonus to its employees from the Origin with Interest, that is why? Most of the Organisations are paying bonus from the starting Budget Year itself.
Since the Contractor is the Contractor to the Principal Employer, the Parent of the Contractor shall be Contract Labour Act (Regulation & Abolition). So you have to pay the Bonus to your Contract Employees, as a Principal Employer, you should ensure with the Contractor, whether the Bonus has been disbursed or not.
Thanks & Regards
The definition of Employee is wide :
(13) "Employee" means any person (other than an apprentice) employed on a salary or wage not exceeding [(Note: Subs. by Act No.67 of 1985, Sec.2, for the words "one thousand and six hundred rupees" (w.e.f. 7th November, (1985)) two 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;
(14) "Employer" includes -
(i) In relation to an establishment which is factory, the owner or occupier of the factory, including the agent of such owner or occupier, the legal representative of a deceased owner or occupier and where a person has been named as a manager of the factory under Cl. (f) of sub-section (1) of Sec.7 of the Factories Act, 1948, the person named; and
(ii) In relation to any other establishment, the person who, or the authority which, has the ultimate control over the affairs of the establishment and where the said affairs are entrusted to a manager, managing director or managing agent, such manager, managing director or managing agent ;
Therefore the Principal Employer will become liable in view of his having the ultimate control over the affairs of the establishment .
Every employer under whom an employee has worked for not less than 30 days in an year is entitled to bonus.
The Supreme Court in Union of India v. R.C. Jain , wherein the Court has held that liability to pay bonus is not a question of mere legal liability, but it must be considered as in the context of maintenance of sound industrial relations.
VS Rajan Associates,
Advocates & Notaries -Legal Consultants-HR
No.27, Ist Floor, Singapore Plaza,
No.164, Linghi Chetty Street,
Chennai - 600 001.
E-mail : rajanassociates@eth,net,
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Mobile : 9025792684.
more at Legal Compliances required for the Staffing Industry
Please resolve the following queries:
1. An establishment is exempted from paying bonus in its infancy period (i.e. first 5 years). here, are we talking about the contractor's establishment or the Principal Employer's?
2. Somebody said in the above post that any employee who has worked for more than 30 days in a year is eligible for bonus. Suppose an employee starts working in PE's factory from September and Bonus is paid in October, when will this employee be paid bonus for the first time?
3. What are the wage limits for eligibility and calculation of bonus?
The answer of your query is,
1. For brief description of infancy period, pls. refer the Payment of Bonus Act.
2. Bonus alwasy be calculated for the FY Apr.- Mar. only & will be paid within 8 months after closing the FY. Hence, eligibility of an employee will also be calculated within the FY only.
3. Wage limit for eligibility of Bonus is Rs.10000/- (Basic+DA) per month, while calculation must be calculated up to max. wages (Basic+DA) of 3500/- per month.
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