Is Bonus Liability Of Principal Employer In Case Of Contractor - CiteHR
Industrial Relations And Labour Laws
Statutory Complaince/labour & Employment
Sr.manager-hr Bangalore India
Hr Manager
Anilrsv Sharma
Statutory Compliances, Contract Labour, Pay
+5 Others

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Is bonus liability of principal employer to contract employee?explin with judgement or any rule
Principal Employer is liable to pay bonus to contract labour if the contractor fails to pay bonus. It is the responsibility of the Principal employer to ensure that the workers engaged through the contractor are paid minimum wages, ESI,EPF and other benefits which includes statutory Bonus. Certainly, the Principal employer can recover the amount so paid by him from the Contractor.

Mr. Madhu is absolutely correct .
If the concerened contractor fails to pay the bonus to their workmen, the ultimate responsibilty lies with Principal Employer(PE). The PE can't escape from such responsibility,as it is statutory requirement.
AK Sharma

Dear Rajesh
As per the definition of employee defined in payment of Bonus Act which is reprduced berein bellow other then apprentence all other employees are including contract labou are also covered.
"employee" means any person (other than an apprentice)employed on a salary or wage not exceeding [Rs.10,000] 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.
In case the contractor does not pay the bonus it is the duty of the employer to pay the bonus to contract labour and recover same from him.
Chief Executive Officer
Aparajita Compliance Solution Private Limited

i also agree that principal employer is liable for payment of bonus on the non-compliance of the contractor
Dear All
No doubt a principal employer is liable to pay wages to the employees of the contractor if the latter fails to make payment of wages to his employees. However, it has been held in one case that the gratuity and bonus will not be payable by the principal employer since these do not come within the definition of 'wages'.
Case Law : Cominco Binani Zinc Ltd. VS. Pappachan, 1989 LLR 123 (Ker. HC).
You can find the JUDGMENT from below link
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All the best
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I have mainatined that the principal employer is not liable for bonus in my previous post and I concur with the interpretation held out in Cominco Binani case as cited by Mr.KVJ Raghunath

Every employee is liable to get his minimum bonus if he's worked of atleast 30 days...... So yes, the principal employer is liable to pay the bonus.......
The question is not about the principal employer, but about the OCCUPIER of the employee's workplace, who occupies the premises, if in your case if it is principal employer is the occupier, then yes, he is liable.......... even the agent is liable if he is the occupier......
(I shall say the judgement is quite the old one, but no matter what it is, in any case if he proves to be an occupier then he will be made liable to pay the bonus. it doesn't at all matter whether he is the owner, or the employer or the agent, or the government itself... since it is the occupiers liability to pay the bonus unlike wages....... )

Principle employer must insure that contract employees are paid there dues on time i.e wages, bonus etc. As contract employee segment is very dynamic so principle employer should insure that Statutory bonus is given on monthly bases in payroll.
Precaution is better then cure and Yes ..principle employee is liable to pay bonus....

There are two issues

1. The quantum or the percentage to be declared

2. Actual Payment

Role of Principal Employer

To ensure that all statutory rights of Employees are fulfilled. Principal employer must ensure that Wages are paid on time, PF and ESI contributions are made, Bonus as per Payment of Bonus Act is complied with.

If we i nterpret that the Principal Employer is liable, then the percentage the Principal Employer declares to his employees must be be extended to the Contract Employees as well But the Act does not envisagae this. The contractor as an Employer must preopare his Balance sheet, get the allocable surplus calculated and then declare the Bonus. It is the responsibility of the Principal Employer to ensure that the Contract employees are paid Bonus as per the provisions of Payment of Bonus Act. This implies that he must ensure that the Contractor maintains records correctly and check the allocable surplus and pay bonus as arrived at. Payment of minimum bonus of 8.33% is not sufficient1.

Actual payment need to be made once in a year. I have come across with many outsourcing organisations making 8.33% as Bonus in the payslip which is not correct.


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