Payment Of Minimum Wages/retrenchment Compensation/leave With Wages/bonus/notice Pay - CiteHR
Madhu.T.K
Industrial Relations And Labour Laws
Psdhingra
Legal Analyst, Hrm
Chvis
Sr Mgr

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We have engaged a contractor for one year period with escalation clause for payment of escalation in case of increase in minimum wages.
We are also paying contractor apart from minimum wages, leave with wages, notice pay, retrenchment compensation and notice pay.
Contractor settled the all above benefits to labout and company also paid his final bill after verifying the above payments.
Later Government increased minimum wages with retrospecitve effect.
You are kindly requested to clarify, whether labourers can claim the above benefits from contractor or company. Please provide your reply with reference to relevant statute.

Your legal relationship with the contractor ends as soon as the contract is terminated. Then why should the principal employer be bothered about arrears of wages payable by the contractor? It is okay if the contract is in force and the minimum wages is revised with a retrospective date and the principal employer has to ensure that the workers engaged by the contractor are paid the difference of wages but from the date on which they were engaged at the principal employer's plant or the date of effect of revision whichever is latter.

In case you agree that the contractor's additional bill will be approved, can you ensure that the contractor is making the payment to the workers who were there in your plant? No, you can not because once they are out of your premises, you have no control.

Your inclusion of notice pay in the contract is also a typical one which I have not seen anywhere. What does it mean? If the contractor's workers are to be terminated the principal employer should bear the cost of termination or notice pay? Is it not the headache of contractor alone?

Regards,

Madhu.T.K

Depends upon the language of your agreement with the contractor. If your agreement is silent about payment or non-payment of enhanced wages from retrospective effect after termination/expiry of contract, you would be laible to pay the back wages also. However, the worker cannot claim directly from the company, but through the contractor.
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